Due to the real estate meltdown, most banks have ended up with more properties in their hands than they can handle. They have more houses for sale than anyone else, but the market has few buyers.
When buying these properties as a real estate investor or home owner, it is important to make sure your offer will be accepted.
These tips will help you make successful offers to the banks and buy REO houses cheap.
1) Get pre-qualified
When you are buying a property from a bank, you must first be pre-qualified, or show proof of cash.
The bank will not consider your offer until you get this, so this should be your first step.
2) Get a good buyers agent
Most properties for sale by the bank are listed for sale by a Realtor. So any offer you make will have to go through the Realtor.
You therefore need to get a Real estate agent working for you to make an offer.
3) Do your due diligence
A great majority of REOs need few or no repairs. A good repair estimate is a must when buying these properties. This will be helpful to negotiate a better price.
You will also need conservative comparable sales to back up your offer.
4) Order an inspection
You must get this when buying bank owned property. Banks don't like to fix houses, but will give you a discount for repairs.
Put an inspection clause in your contract to get you covered.
An inspection will bring out issues you were probably not aware of. This would be a strong bargaining point with the bank which should also bring down your offer price.
If your offer requires the bank to fix the property, it will be rejected. Your buying terms should be as is where is. Make sure your contract shows this. They will give you a discount based on needed repairs.
5) Other costs
If the home is in a community where there is a home owners association, make sure that all dues are paid up, and your fees will be prorated from the day you own the property. In foreclosed properties, it is common for fees and fines to accumulate.
Ensure you get these fees credited at closing.
Also make sure all taxes are paid. Make sure you receive a prorated credit at closing.
Lastly, make sure the utilities are paid up; you could be stuck with huge bills that were not cleared by previous owner. Make sure these are cleared.
6) Make offers lower than the asking price
Banks are ready to negotiate. Always offer lower than the asking price. Properties that have been sitting in the market for a while will be more discounted.
Do not offer more than 10% lower than the asking price. If your offer is rejected, you can always offer a little more depending on the bank's counter offer.
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