Writing An Offer On A Charleston REO Foreclosure Home
This is a guide to writing an offer on a “Bank Owned” or corporate property, (Otherwise known as an REO). By understanding the process, you will reduce the stress on everyone involved and greatly increase your odds of completing a successful transaction.
Review these items prior to submitting an offer. Everything you need should be in this document. If, after reading this, you have further questions, please contact your agent. If you do not have an agent please consider using The MarshallWalker.com Group for your expert buyer representation. We are Certified Distressed Property Experts CDPE and we are also Five Star REO and Short Sale certified. We are a preferred listing agent of several large banks and asset management firms; also we are Equator Platinum Certified as well as Res.Net certified!
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The foreclosure process is much different than a typical retail sale. In the REO foreclosure market, the seller calls all the shots. Some terms will be deleted from the usual contract, some terms may be added that may not be familiar. Please read this entire document to help understand this.
The Listing Agent (REO Broker) is simply a conduit between the Buyer’s agent and the Seller. The Listing Agent does not have any power or say as to what the terms are and has little or no negotiating power or inﬂuence.
Your Financing - this is where it starts
Pre-Approval. Start the loan process well before making an offer. This avoids surprises and can save you from paying the per Diem penalty or even losing the Earnest Money Deposit (EMD). A good pre-approval can make your offer as good as cash!
Lenders come in many forms, however its is imperative that the lender you choose to work with is experienced with the REO foreclosure purchase process - We still run into many circumstances where a buyer's lender refuses to start the underwriting process prior to having a signed contract in hand. This will not work -
To be ready to jump when you find that perfect home is a truly satisfying experience - to beat out other offers because you understand the process is priceless.
DU- this is the acronym for DESKTOP UNDERWRITING - this requires that you allow your lender to pull your credit, that you supply your last 2 years taxes complete with all schedules (and signed), your pay stubs for at least the last 30 days and your bank and asset statements for the last 60-90 days. With desktop underwriting complete your lender will issue a letter stating that you are approved for a loan subject to a contract of purchase, acceptable appraisal and clear title. This letter can make your offer as good as cash. Ask your lender to complete DU.
In some cases a manual underwriting process will be required - this can take a little longer but better done before the offer than to be delayed after signing a contract!
Manual Underwriting will also be required if you are self employed - your Loan officer will need your P&L (profit and loss) and balance sheets for the 2 previous years and for the current year to date.
Cash Buyer? You will need Proof of Funds. Don’t wait for the Seller to require it. I personally suggest that you speak to your banks branch manager and let them know you will be needing a letter of available funds for a home purchase.Send Proof of Funds as they will be REQUIRED.
Hint- Most REO sellers will require the pre-approval or letter of available funds to be for the full listing price - not just the offer amount. For example if a home is listed for $125,000 and you are only offering $100,000 I suggest you be ready to provide a letter for the full $125,000.
Ask your lender to give you a GFI (good faith estimate) so you will have the amount for closing costs in hand- while it is OK to ask an REO seller to pay for closing costs it is important that you don't ask for more than actually needed. Some REO lenders will not pay closing costs unless you are using FHA or VA financing.
KEEP YOUR OFFER CLEAN - do not add contingencies, “subject to” or “seller will” paragraphs to your offer - it will lessen your chance of successfully purchasing your home. Do not put an offer expiration on your offer -the asset manager will not respond to deadlines and in fact may just reject any offer containing a deadline.
Use an experienced Buyers agent who has a track record with the REO list agents - list agents will recognize that the Buyers agent is educated in the REO process - we work over and over again with REO listing agents and have formed strong relationships with many of them - these agents know and respect us (this can definitely improve your odds of purchasing a hot REO property) - remember many of the List agents are incredibly busy and the last thing they want to do is educate a buyer or worse yet an unseasoned real estate agent about a REO sellers due process.
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