Real Estate Investor · Placentia, CA · Member since 2008 · 13 posts · 0 votes
Hi Guys I am new so bare with me.
I am looking to put a few offers out there on some REO's. I will be using transactional funding on them and bringing in my own end buyer. My question is on my initial offer to the REO lender how much deposit do I need?
Sherman Oaks, CA · Member since 2008 · 2 posts · 3 votes
17y
Originally posted by Paul Cordero:
I always try to get at least 2% or $500 whichever is greater. $5000 would be good EM depending on the purchase price.
I agree with Paul. I have purchased several REOs throughout the years. When the EM is 2% or $5,000 (greater of the two), banks will take a more serious look at the offer.
If you are indeed new to this Rick, I should mention that EM is just a piece of the puzzle. Make sure you (or your agent) is presenting the offer properly...submit with your offer POF, FICO, underwriting approval (if possible) and any other type of documentation that shows you are for real. The more comfortable the bank is with your ability to close, the more of a discount you will likely be able to negotiate.
Investor · Rancho Cucamonga, CA · Member since 2008 · 1k+ posts · 684 votes
17y
With a "mass low-balling" approach I got very few offers responded to. Even on the properties I have listed, I see these investors that come in at half of asking and I just turf the offers.
Find a property that the bank is willing to be flexible on (trashed, many days on market, etc) and negotiate until you get it.
Sherman Oaks, CA · Member since 2008 · 2 posts · 3 votes
17y
Originally posted by Paul Cordero:
I always try to get at least 2% or $500 whichever is greater. $5000 would be good EM depending on the purchase price.
I agree with Paul. I have purchased several REOs throughout the years. When the EM is 2% or $5,000 (greater of the two), banks will take a more serious look at the offer.
If you are indeed new to this Rick, I should mention that EM is just a piece of the puzzle. Make sure you (or your agent) is presenting the offer properly...submit with your offer POF, FICO, underwriting approval (if possible) and any other type of documentation that shows you are for real. The more comfortable the bank is with your ability to close, the more of a discount you will likely be able to negotiate.
Real Estate Investor · San Antonio, TX · Member since 2008 · 553 posts · 20 votes
17y
You may also want to include in your package recently sold props that support your offer.
An itemized list of needed repairs w/price quotes from licensed contractors.
I'd also advise you to offer in the high side of your comfort range once you have a history of performance the banks will be much more willing to work with you.
That depends mostly on your local market conditions.
Real Estate Investor · Milwaukee, WI · Member since 2008 · 1k+ posts · 671 votes
17y
On the REO I am currently working on I offered 15% EM on the first offer. Now that we are getting closer to a deal and they know I a a serious buyer with proof of funds I have lowered my EM. Things have not been looking good lately, and many of these houses are difficult for the average person to purchase. As an investor with cash, you hold a powerful position. You should be getting a deal these days or your money is better spent elsewhere.
Real Estate Investor · Virginia, DC &, MD · Member since 2008 · 261 posts · 71 votes
17y
One great strategy is to check DOM and see which properties are languishing on the market for extended periods of time. These are the properties that the banks are the most motivated to get rid of at a bigger discount.
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
17y
If you're buying these REOs for cash, do the following.
I write a check for 50% of the offering price. The agent presenting the offer adds a copy of the check to EM agreement. Realtor keeps check with instructions not to deposit until offer is accepted. I also tell seller I'll close in 14 days.
This sets me apart from all the cheapskate, tire kickers that are running around. My same copy of that check may be used on other potential deals. Rich.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
17y
Originally posted by Rael Mussell:
I just put a bid on a property for 5000 showing 500 EMD in check to the bank, asking for no closing assistance only contingent on inspection.
Is 500 appropriate for the bid I placed on the home? It's 10%?
For any cash purchase, I see no reason to submit earnest money at least than the total purchase price -- ESPECIALLY for small purchases like this.
For example, if I place an all-cash offer on a $60K property, I will submit $60K in EM. Sure, I could submit $5K or $10K, but ultimately, there's really no difference to me in the end, and offering 100% EM on a purchase really makes an impact on the seller, even if your offer is lower than others.
The other nice thing about 100% EM is that on closing day, you don't need to wire the money or get a cashier's check. The house is already paid for, so I can just take a personal check to the closing table to cover closing costs.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
True, but for higher value properties, I don;t want to tie up Hundreds of thousands for 14 or 21 or 30 days, so a large EMD is more than sufficient. At least it works for me.
Real Estate Investor · Chicago, IL · Member since 2008 · 21 posts · 1 vote
17y
What about if you are just starting out making offers on bank owned property and you don't have a lot of cash for the EMD? What is the best method when you are new?
Also if you are making offers on multiple properties are you writing checks for every property? That could add up pretty fast.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
17y
Originally posted by Nicholas Richardson:
What about if you are just starting out making offers on bank owned property and you don't have a lot of cash for the EMD? What is the best method when you are new?
I wouldn't make offers on an REO if you don't have at least $500 to put down in earnest money. While it's *possible* you might get an offer accepted with less, it's unlikely, and I'm not sure it's worth the time and effort to try.
Also if you are making offers on multiple properties are you writing checks for every property? That could add up pretty fast.
Most realtors will ask you to provide a personal check for the amount of the earnest money, *BUT* I've never seen one of those checks actually get cashed. It's pretty much just a show of good faith.
When an offer does get accepted, the realtor will generally ask you to provide certified funds for the earnest money, and will give you back your uncashed check. So, there's no reason why you can't write multiple checks without the worry of having them cashed. In fact, many agents are happy to just get a photocopy of the check, so you can actually use the same check for multiple offers.
Regardless, I would ask the agent you're working with for their guidance on this before you proceed...if they are used to making offers on REO properties, I'm sure it's not the first time they've gotten the question...
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
17y
Like Jason stated, just make out your EMD payable to "Escrow" and use the same chekc for multiple offers. They never get cashed, as the banks want certified funds sent in or a wire transfer. You don't have to worry about that until after the offer is accepted.
Real Estate Investor · Ann Arbor, MI · Member since 2009 · 32 posts · 8 votes
17y
If you are new at this I recommend you NOT make all cash offers unless you have private lenders lined up because they will request proof of funds and will want to see a higher EMD
Instead make your offers contingent upon financing (the ONLY contingency you should ever put in the contract by the way.) And submit a prequalification letter from your hard money lender, transactional funder, or private lender
and you can get away with lower EMD's. Yes fewer offer will be accepted but you gotta start somewhere...
As soon as yopu possibly can raise private money so you can become a "cash buyer" remember just because your a cash buyer doesn't mean it's gotta be your cash. But when your making cash offers you definitely have more leverage over the others.
Real Estate Investor · Ann Arbor, MI · Member since 2009 · 32 posts · 8 votes
17y
One more thing...my FICO score has never had any relevance whatsoever on my offers. No body asks...some HML's will if you ask them to write you a prequalification letter
but with private lenders it never comes up.
Tucson, AZ · Member since 2008 · 945 posts · 45 votes
16y
When considering reos, do you go see them, inside and out, before submitting the offer, or wait until its accepted then inspect?
Are banks really going to consider an offer that is really low, (investor price low) even with a large emd, and maybe cash payment, when they can get a much higher price?
How does one get a POF, if they plan to buy with cash?
Thanks,
Ofgift
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
16y
Originally posted by Ofgift Gift:
When considering reos, do you go see them, inside and out, before submitting the offer, or wait until its accepted then inspect?
Personally, I'll never make an offer until I see the property. My wife has her license, so we have no problem getting into properties, and I can do a pretty good rehab cost estimation in about 15 minutes; so by the time I make my offer, I'm 95% sure I know exactly what I'm willing to pay and what my potential numbers will look like.
Are banks really going to consider an offer that is really low, (investor price low) even with a large emd, and maybe cash payment, when they can get a much higher price?
I've gotten deals for cash and no contingencies for more than 10% less than other buyers asking for financing and contingencies.
One specific example was a property we picked up for $60K, and the bank had turned down a $68K financed offer with an inspection contingency.
How does one get a POF, if they plan to buy with cash?
I just print out my balance from online...make sure the name of the person/company making the offer is visible on the balance statement.
Tucson, AZ · Member since 2008 · 945 posts · 45 votes
16y
Originally posted by J Scott:
Originally posted by Ofgift Gift:
Are banks really going to consider an offer that is really low, (investor price low) even with a large emd, and maybe cash payment, when they can get a much higher price?
I've gotten deals for cash and no contingencies for more than 10% less than other buyers asking for financing and contingencies.
One specific example was a property we picked up for $60K, and the bank had turned down a $68K financed offer with an inspection contingency.
Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
16y
Originally posted by Ofgift Gift:
When considering reos, do you go see them, inside and out, before submitting the offer, or wait until its accepted then inspect?
Are banks really going to consider an offer that is really low, (investor price low) even with a large emd, and maybe cash payment, when they can get a much higher price?
How does one get a POF, if they plan to buy with cash?
Thanks,
Ofgift
Banks are really strange and hard to gage when it comes to offers. I had offers turned down without a counter only to find out days later that the bank lowered the asking price for less then my offer was. Some banks would lower the list price of a property to a ridicules level just to generate a bidding war. Sometimes it works and some times it back fires. I recently bought a property that was listed for $22,000. The bank suddenly lower it to $13,000 with the hope to generate some heat. The listing had the zip code wrong which cause it not to appear on the local MLS map. I grabbed it for mere $10,500. I just finished rehabbing it ($1,374 rehab cost) It will rent for about $550-$600.
Some banks would stick to the asking price for months and would not compromise even if the market no longer supports it. Go figure.
BTW, In my experience, the amount of the EMD doesn't play much. The bank has a minimum required and as long a you submit POF that satisfies them, they are looking mostly at the offer itself. I'm trying to put as little EM as I can because the type of properties that I buy. I don't role those properties over, I rent them out and for me , there is no point of buying a $5,000 where I have to put in $25,000 in rehab to rent out. So putting $500 EM is an amount I can live with losing should the deal go sour.