BiggerPockets

People everyday ask me: ”How do you get offers accepted by the bank owned real estate broker?” I tell them, “You need to make sure your offer is priced correctly”. But in reality, it’s far more complex than that. There’s a variety of things that will aid in your quest of obtaining a property and here I will reveal to you what they are…

1. Pricing – Be reasonable and think a little. If a house just came on the market yesterday for $100,000, and you low-ball them a $70,000 offer, chances are, your offer gets trashed and so will your credibility. Now I am not saying to lowball, but only do so when it’s the proper occasion. The previous would be a bad example of when to lowball. It’s hard to believe, but the Lenders also have minds and they place smart people in charge. They know that when they first put a property out, they would not take the measly low offer because they are testing waters. Plus, chances are likely that there are already many more offers higher than yours. So don’t waste your time and the realtor’s time submitting offers that will never go through – especially when properties first hit the market.

Now if you want to lowball, do it on the homes that sit on the market for 3 months or more. Keep in mind, the banks still want to get these suckers sold, so when you see a property just sitting on the listings without any action, give them an offer. Chances are A LOT higher that they will accept a lower offer in this occasion simply because they aren’t getting any other interest and therefore, no other offers.

2. Proof of Funds – When buying bank owned homes, this is a must. If you do not have this one piece here, stop all procedures and acquire it first. Otherwise, you are again wasting your time, and other people’s time and probably killing trees in the process. Lenders, asset management companies and even the broker’s will not even pay attention to your offer if you do not have a proper Proof of Funds. Now Proof of Funds can come in a couple forms. It can be a copy of a bank statement showing the money available in cash. It can be a pre-qualification letter by a lender for a mortgage. It can even be a letter authorizing an individual access for a certain amount of cash (of course must be secured by real funds). Most lenders prefer cash proof of funds and payment in cash. Why? Well, because it means they can get their home sold faster and easier. No mortgage work and none of that non-sense. It’s just a straight up As-Is sale. So if you are looking to offer to bank owned homes, please make sure you have proof of funds. If you got the cash, great, get it in writing (black out your account number). If you have friends who got the cash, great as well, get it in writing. If you need a mortgage, go to a mortgage broker and get a pre-qualification letter ASAP.

3. Outrageous Terms – These are bank owned deals, so you know the lenders want them gone, but again, these guys that did a number on our economy can still process and analyze information. Therefore, if you put outrageous terms in your contracts, you might as well not submit an offer at all. Here’s some examples of outrageous terms…

A. 30+ Day Inspection Period – Now 30 days is already really pushing it. Unless you got some previous background on the deal, don’t ask for more. You will more than often get denied.

B. Assign-ability - Just make sure this is checked as no. The assigning days of these contracts are long gone. Sorry, you missed out! You check mark this box and your offer becomes a paper basketball.

C. Tiny Deposit Amounts – Ten bucks ain’t gonna cut it here. In South Florida, it’s normal to see $1,000-$2,000 deposits on 50K-120K homes. Make sure you have a proper deposit on the line, otherwise, the wills think you are just fooling around and pay no mind to your offer.

D. Far Away Closing Date – Don’t close next year… Banks want homes gone Fast. You put a closing date that’s months away, and even if your offer is better, they will take the lower one who wants to pay up in the next 3 weeks. Make sure your closing date is within feasible range. 30 days or about a month is standard. You can put less if you really know what you are doing or if you really want to buy that particular property.

So what else can you do to make sure your offer get’s accepted? Well, that’s for the next article. There’s one last key element that can get you the good deals and cut your competition out. We will go over that next time.

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

- Warren Buffett

It’s no coincidence that Buffett, Trump and all of the millionaire tycoons make their fortunes in hard times. As history would tell us, after every depression, came a new wave of incredibly wealthy millionaires. What do they all realize? They realize exactly what Buffett said above.

Right now, the Real Estate Market has become a subject of fear. But for the investors who understand Buffett’s quote, the Real Estate Market has become a subject of wealth and opportunity. In fact, the Real Estate Market has never gave us such an awesome opportunity in history. Right now, the REO Home Market is, quite frankly, amazing. We have the ultimate motivated seller, the Banks. And not only that, but our motivated seller has A LOT of properties and homes. And we really mean A LOT of homes.

June 8, 2009, the number of homes in foreclosure skyrocketed to over one million. As of January of this year, RealtyTrac reported a total of 1.50 million bank-owned properties for sale. But that’s not all, the Bank are also holding out on a large chunk of Foreclosed Inventory, known as “Shadow Inventory”. This inventory is enormous, and can perhaps be as big as 80% of the inventory listed for sale. This is what Makes the REO Market So Huge and so widely available.

It’s an evolving real estate market and right now, its the REO home market that’s changing so drastically. So what exactly is an REO home? Well REO stands for “Real Estate Owned” which is an internal term banks use to describe homes that have been foreclosed and that are now under their possession. Essentailly, they are “Bank Owned” homes. The same way banks repossess cars and than sell them off cheap at auctions to cut losses is the basically what they are doing with their REO homes.

Except now they are in an incredibly bad situation. Banks are now handing many of these REO homes away for pennies on the dollar. Why are they doing this? Well because they can’t afford not to. When the banks acquire a certain number of foreclosures in their portfolio, they are forced to get rid of them else the government steps in and kicks the owners from control. The owners want to keep making money, so that’s the last thing they want – the government to control their money flow.

Right now, foreclosures are pouring in at a rate that banks can’t nearly keep up with. This has a lot to do with their selfish acts in 2002, 2003, 2004, and 2005, making a lot of bad mortgages that they knew was no where near possible for the people to actually pay. These bad mortgages however, increased their own lending power and stock value. Now its coming back to bite them and the entire economy in the butt. The hundreds of thousands of mortgages that were authorized by the banks were set to detonate in 5 years. This is why we began seeing the foreclosure bomb explode in late 2007 and throughout 2008. But that’s nothing. Our banks in their god awful greediness manufactured more of these 5 years mortgage bombs in 2003 than they did 2002. More in 2004 than they did in 2003. More in 2005 than they did in 2004. It’s a wonder why no one stopped them sooner.

But all is well. By doing this, the Bank has put themselves on their knees making them the ultimate Motivated Seller and with plenty to sell. This is why the REO Market is so spectacular. You can literally find REO homes for pennies on the dollar, if not pennies in your pocket. Banks, especially during quarter closing and the end of the month are just slashing properties from their portfolios to keep the government off their bakcks. And through all of the REO’s being tossed left and right, occasionally, there’s a Gem of an REO home tossed away as well. We here at ezREOhomes find those gems and put it in the hand of our investors, and in the hands of a proud homeowner.