It’s no secret that there are some great deals available on the mls right now in the form of REOs and short sales. I’ve been wholesaling REOs off of the mls for the last two years, and have learned a thing or two about what the banks are looking for in an offer.
Whether you are trying to get the bank to give you a substantial discount off of list price, or you want to snag a great deal that just hit the mls, implementing the following five strategies will greatly increase your chances of getting an accepted offer.
1) Make Cash Offers
When I first started going after REO properties, I was submitting a pre-qualification letter from a hard money lender with my offers, and using a financing contingency.
After about 3 months of making offers and getting none accepted, I decided to do a little research on the mls. I was shocked to see that many of the properties I was losing out on were being sold to cash buyers FOR LESS than what I had offered.
I quickly switched my strategy and started submitting cash offers using a statement from a line of credit as my proof of funds.
After doing this, I noticed a DRAMATIC difference in the response I was getting from the bank. Instead of my offers being ignored, I was now getting counters from the bank, and eventually started getting some acceptances.
2) Drop the Inspection Contingency
If you want to make your offers stand out to the banks and show them you are serious- do your due diligence ahead of time, and drop the inspection contingency from your offer.
On more than one occasion, I’ve had listing agents tell me that the bank was taking my offer over the others because mine was the only one submitted without an inspection contingency.
If you decide to keep the inspection contingency in your offer, try to limit it to only a day or two, and also keep in mind that most of the time, the banks will include an inspection period in their addendum. Many times, I make offers declining an inspection period, and end up getting one anyway because it is included as part of the bank’s addendum.
3) Give the Listing Agent Both Sides of the Commission
Many listing agents will go the extra mile to get your deal pushed through when you are giving them both sides of the commission.
It took me awhile to catch on to this strategy, but once I started implementing it, my acceptance rate improved remarkably.
Many people believe that it makes no difference whether or not the agent gets both sides of the commission- the agent, after all, is supposed to have their client’s best interest in mind, and such things shouldn’t matter when they are presenting the offer to the seller. While that sounds great in theory, I can tell you from experience it is not the case in most instances.
4) Offer a Large Earnest Money Deposit
When it comes to earnest money deposits- the bigger the better!
If you want to get the bank’s attention, put your money where your mouth is and offer up a substantial deposit. It also helps to include a copy of the deposit (in certified funds) when you submit your offer.
By far, the biggest discounts I have received on REO properties came when I was offering 5k or more as an earnest money deposit.
5) Offer a Quick Closing
Even though the banks usually need a month or more to get a deal to the closing table, offering a fast closing will make your offer appear much stronger in their eyes.
I always offer to close in 5 days, and even though I know the bank will most likely not be able to get it done in that short of a time frame (they usually will counter back with a closing date of 3 weeks or more), it still sends the message that I mean business.
While there is no way to guarantee that your offer is going to be accepted, if you start implementing one or more of these tactics when you are submitting your offers to the bank, your chances of an acceptance will increase dramatically.
Article Author:
Stephani DavisStephani has written 26 articles for us.
Visit Stephani's Website: http://www.flipthiswholesaler.net/
Formerly a bartender, Steph Davis is now a full time wholesaler in Tampa, FL. If you'd like to get an idea of what it's really like out there in the trenches, head over to her blog: FlipThisWholesaler.net!
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{ 11 comments… read them below or add one }
Great information Steph! One thing I have a problem with though is that if I make a cash offer, the banks are requiring a 10% deposit, which I usually don’t have. It is true that bigger deposits show you mean business though! I just got under contract on a great REO deal for a 4 unit building and I think my chunky earnest money check helped along the negotiations!
Hi Melody,
Congrats on the 4 unit..
My experience has been that only certain lenders will ask for 10% as an EMD. Fannie Mae is one of them, and there are a few others who do, too.
Most of the ones I’ve offered on, though, were fine with a 1k deposit even when I’m offering cash.
Hope all is well with you,
Steph
Steph´s last blog ..Happy Monday
Well said. However, over the last few months I haven’t noticed a difference with cash offers. I guess the banks are so swamped with offers on reo’s they’re getting thrown in piles with everyone elses offers. This is Florida though, I can’t speak for the rest of the country.
wow 5 day close!? i know most of the time they counter more, but my luck they would say GREAT!! and now im hopeing my end buyer actually want it. Well, im just looking again for a title company that will help me out, and its time to offer on some places these guys “say” they are looking for! Great article!
Hi Steph, first, great info! Second you talk about a line of credit statement. i know what a line of credit is but can u elaborate where you got it, was it a line of credit backed by one of your HM lenders?
Hi,
Thank you for your tips : ) One question for you, so what are you making if your are giving up your side of the commission to the listing agent?
Hi Maria,
I’m wholesaling the properties I get under contract to other investors, so I make my profit on the spread between what I am buying from the bank for, and what I am selling to my investor for..
Steph
Stephani Davis´s last blog ..Reader Mail- How to Use the MLS to Build Your Wholesale Buyers List
Oh, Okay. Any tips help right now. It so hard to get anything accept. It’s carzy. Thanks
Great Advice as always Steph, but I have one question am I using my own funds for the emd?
Hi Rodney,
Yes, unless you are able to secure a buyer very quickly (like the same day you get your offer accepted), you will need to have your own EMD.
Steph
Stephani Davis´s last blog ..Home Sweet Home
Good info ! Just put one through here in Orlando and asked for a ASAP closing and they still took over 25 days.