Top 20 tips for making offers on Freddie Mac/Home Steps REO properties

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Federal Home Loan Mortgage Corporation (Freddi...

In today’s challenging real estate market where 30 offers on homes out here in Victorville, CA is the norm, (and I’m sure the same applies all over the United States) we need every little bit of information to help our offers stand out from the crowd.

I have made countless offers on REO properties including Freddie Mac deals, and these tips reflect my experience in dealing with them. These are the things that Freddie Mac always counters with and always wants flat out.

When making an offer to purchase a Freddie Mac or Home Steps owned property you should try and follow these guidelines to help your offer stand out from the crowd and help you save a day or two in negotiations with them.

The Top 20 Tips for Making offers on Freddie Mac, Home steps or FHLMC Properties

  1. All offers should be submitted on your states association of realtors purchase contract. They will not touch an offer made with a contract you came up with or bought at your local office supply store.
  2. All offers should include a pre-approval letter from your lender if you are obtaining financing. A direct lenders pre-approval will carry more weight than a mortgage broker.  A direct lender is one that lends its own money to put it simply.
  3. Investors! Do not ask for closing costs! Sorry, but they will not pay closing costs for an investor period.
  4. Do not ask for more than 3% in closing costs. You are wasting your time asking for anything more than 3%. If you try to raise your offering price above their asking price thinking they will pay more than 3% they will always counter back to 3%. Also when asking for closing costs ask for a dollar amount not a percentage. For example, in your offer you would state that seller is to pay buyers recurring and non-recurring closing costs not to exceed $5000. Remember this is only an example. Do not go asking for $5,000 on every deal cause Winston told you, lol.  They need a dollar amount so they can quickly figure out the final net to the bank. If they have 40 offers the last thing they want to do is extra math trying to figure out the percentage.
  5. Do not ask for them to pay the property transfer tax. They will not pay this fee. Don’t ask for this cause they will always counter you back. I know the seller has customarily paid for this fee but Freddie Mac is exempt from paying this.
  6. Loan Applications to be submitted within 7 days. If you are obtaining financing to purchase the property you want to state that your loan application will be submitted to the bank a least within 7 days of them accepting your offer. Anything longer than 7 days and they will counter.
  7. Your offer should not expire less than 14 days. When you make an offer make sure that your offer will not expire until 14 days after the date it was submitted to them. Freddie Mac is inundated with a multitude of properties and things can delay them. The last thing you want is for them to toss out your offer just cause it expired and the other guys didn’t . Get my drift? When the bank has 40 offers to choose from don’t you think they look for any little thing to toss yours out?
  8. Submit your HIGHEST & BEST offer off the bat. The banks sit around and collect a ton of offers on their properties. Then they look at each other and say, “gosh darn it! These offers need to be higher bro” so they tell the listing agent to go send out a note to all the people that submitted offers to tell them to send to the bank their highest and best offer so we can squeeze more money from you. You then have to think about how much higher you need to go because you know that everyone else is going to be raising their offer. In the beginning when you submit your offer sit down and offer the most you are comfortable offering off the bat. Write on the top of your offer “HIGHEST AND BEST” . Then they know you have been around the block and you know what’s going on.
  9. Do you need that Home Warranty? You can ask for one but as long as it does not go over the 3% of the closing costs they will pay for owner occupied offers. It would be sad if you lost that deal due to a $300 home warranty.
  10. State what kind of buyer you are. Let them know off the bat if it’s going to be owner occupied or non-owner occupied. If you are a first time buyer or not. Yes, I am sure it matters to them. Which one is best? I would assume a first time buyer and owner occupied.
  11. Let them know if you are a licensed real estate professional. State on your cover sheer if the person purchasing the property is a licensed real estate professional.
  12. Freddie will provide a pest report and natural hazard disclosures. Do ask for them.
  13. Complete your inspections in under 10 days. The pre-printed length of days on CA contracts is 17 days. Freddie Mac will counter anything above 10 days. If you can complete all your inspections in 5 days then state it in your offer. I know some inspectors that will fly out to the property in 24hours and have the report back that evening. Remember you have to stand out of the crowd of 40 offers.
  14. Buyer to pay $50 per diem. State in your offer that, “Buyer will pay $50 per diem for buyer delays only beyond the agreed upon close of escrow date“. Flat out this means that you understand that you can be penalized  $50 a day if the closing is delayed by any fault of yours (ex. Your real estate agent, your loan officer, your dog) for every day passed the agreed upon closing date.
  15. If you are paying cash go no longer than 20 days for the closing date. If you are not obtaining financing for the purchase they want you to be able to close the deal in under 20 days. Also if you are truly paying all cash state this fact and that you are not obtaining a hard money loan. State you have liquid cash funds available for this purchase and that no financing whatsoever is being obtained for the purchase of this home.
  16. Send proof of funds to close the deal. If you are paying all cash send a financial statement where the money is held. Hey people, don’t send a statement from Dec 2008, send them something current. If you do not have one go online and print one if you have online access to the account. You want to prove to them that you have the money for the down payment or the money to purchase the house outright.
  17. Put a big down payment. The bigger the down payment the more serious you are about buying the property. If you are going FHA lets say you need 3.5% down payment anyways so why not place that as your down payment. If you want the property bad enough you have to stand out from the crowd that only places the minimum down.
  18. State that you have visited the property. Some have been asking for proof that the buyer has physically visited the property. The reason for this is that a lot of investors are tossing out offers on properties and not physically going to see the property only to weasel out of the deal after inspecting the property. This wastes everyones time. When you go visit the property take a picture of yourself in front of the property on your camera phone or what not. Keep it as proof in case you are questioned.
  19. Make sure everything is legible, neat and organized. Need I explain? When you have 40 offers to choose from and the guy at the bank is trying to decipher your English hieroglyphics and can’t make out what the heck something says then what do you think you are going to get as a response? You are going to get, “Sorry but the bank has accepted another offer. Thank you”.
  20. Send a cover letter with your offer. On this cover letter you want to briefly explain the main selling points of your offer that you believe will make you stand out. Like for instance: A short closing period, huge deposit, short inspection periods, all cash, buyer has visited the property, owner occupied etc etc. Make sure to include all your contact information.

I hope these tips along with in your toolbox will help you kick some tail out there in the game of real estate.

Good luck in all you do America!

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About Author

Winston Westbrook is broker & owner of Westbrook National Real Estate Company servicing the cities of Victorville, Spring Valley Lake, Adelanto, Hesperia, Apple Valley & the surrounding Victor Valley High Desert communities of So. California. Specializing in short sale and distressed properties.


  1. Thanks for these tips Winston! I just came across a Home Steps REO deal for the first time last week and have been doing a little research to understand the nuances with these properties. Good stuff. Much success to you!

  2. I am in the process of buying a house from Homesteps. If you plan on purchasing one yourself, make sure that you have plenty of time before you need to be in the house. They will take days, sometimes weeks, to get back with counter offers or answers on amendments. It has been a really frustrating process for me.

  3. @ Shae, No prob I hope these tips help you land that deal. Thanks for the well wishes. Good luck to you!
    @Jason, Thanks for commenting. I’m sure the process can be challenging but keep it up. This is the best time in world for real estate. You will love yourself for persevering. Good luck to you.
    @Liz, Yeah they can be a little picky. Knowing how to make an offer exactly how they want will help you get your offers accepted. Good luck to you.
    @Joshua, Thanks for the compliment. Much appreciated. I believe this post will definitely give the member the advantage above the rest.
    @Lafi, Thank you. Joshua Dorkin hit in on the nail. You might want to copy and paste as well onto a word doc etc. Good luck to ya.

  4. Additional tips, Freddie & Fannie do not like closing on last day of the month, they love closing middle of the month in the middle of the week. Easier to negotiate an offer 2 week of the month usally Tuesday or Wednesday quicker response. Bottle neck for asset managers is Mondays, last week of month or first couple days of the month. Hope this helps.
    Happy selling

  5. Hello Winston,

    I am a first time buyer bidding with an offer that is cash/higher offer vs mine that is conventional/lower offer. Any tips you can offer? The broker has not submitted neither of them yet. The broker received their offer one day later than mine. Is the broker suppose to submit both offers?

  6. @Eric, Banks are skeptical at everything nowadays, lol.
    @Anahi, Yes the broker is supposed to present all offers. Whether they do is another story, lol. Feel free to call me if you have any other questions. Good luck on your offer. Hope you get it accepted.

  7. Great Post Winston! I know it’s a little old, but I think this is a great list and very informative. I will admit that #8 is tricky. lol But I guess you gotta to what you gotta do in order to get the deal. REOs are definitely rising everyday and the more we can understand to make our deals more efficient the better.

  8. Great tips, as usual. I have a question, I’d like to make an offer on n REO that’s been listed for $85000.00 for more than 9 months. Then, a new Broker got it and listed it for$95,000.00, they’ve had it now for 6 months. In total the property has been on the market for over 14 months and my offer is under $50,000.00, is this doable? Has anyone had any success in getting the bank to accept an offer this low? I was seriously considering going even lower but could use some insider help on this one. Thanks everyone!

    • I have just got a contract completed with Homesteps which started back in 11/09. We will hopefully close 5/3/10. The home has been vacant since 11/08. The mtg balance is about $170.
      The home was first listed at $110. I bid $60 cash. They rejected it, and took many offers from buyers needing financing. Months went buy and no one could close the purchase. They came back to me in 2/10 and they were now asking $99. I started at $60 and moved up to 68. They didn’t want to go below 95. I walked away again. Finally, they came back to me 3/15/10. We went back and forth, I moved to $72, while they went to 93, again I thought things were dead. Finally, the listing agent told my agent, if I could get to $75 we would have a deal. So I agreed to $75 and on 4/21/10 I rec’d a signed Home Step contract.

  9. Have you heard of Freddiemac denying an offer within 24 hours on a foreclosed home due to tenant occupancy? We were told because they could not verify when the tenant would vacate the premises that they could not accept our offer of full asking price. The property has been foreclosed on since August 2010 and listed for sale since October 2010.

  10. Trying to buy property from Freddie Mac, this is property that has been in family since 1945. Cousin lost to EO. Want to buy #1, this property butts up to my property, #2 I had try to buy property when my grandmother was alive, but she had already made her mind up it was going to a boy with the Iates name, #3: sentamiental reasons. Since Freddie Mac frowns upon family buying back family property, any advice on how I can get this property?

  11. I’m interested in a house that is listed at $354K and the foreclosure amount was $278K. In your opinion, what would be a reasonable highest and best offer? Thanks for the great article. Also, any updates for 2014?

  12. I bought a home for through homesteps listed at 13k. there were two bidders on the house. I asked if I should offer 20k to seal the deal and the real estate agent told me I did not have to make my best offer at this point. I went ahead and offered the 13k and went into the big and best section eventually buying the house for 30k.. I later found out the other bidder placed an initial bid of 18k on the house and was going to turn it into investment property. Do I have any recourse. I do not mind the 20k price but I think I was tricked into offering 10k more. Also why didn’t the 18k offer trump mine??

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