BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
I wanted to share a great post with everyone from the BiggerPockets blog by Winston Westbrook, which details how to increase the odds your Freddie Mac / Home Steps REO offers will be accepted. Check it out and be sure to leave your thoughts below the article or here.
Pretty good, some of this has changed over the past 2 years...HIghest and best off the bat depends on the market. If there are 40 offers, they're going to ask for it anyway, so sure, why not. But all markets are different and you're not going to have multiple offers on every property. In those cases, you have room to grind it out, but don't waste time low-balling REO's. You usually won't even get a counter, or they will counter at list.
I don't agree with sending a cover letter - No asset manager is going to accept an offer because it included a letter saying 'pick me, pick me'. Money talks, and cash is king. Want to get your offer accepted by a bank? Cash, AS IS, no inspections, no contingencies, close ASAP.
I regularly have asked for 3% in closing costs as an investor and gotten it. I would say rule #3 is incorrect. I also don't give my highest and best. What I do is give a low offer, if the bank goes down, I start coming up with my offer. At some point I add the 3% to offset the increase in my offer. I finance my property purchases and I do like to give 10% earnest money.
I have a question, I've read in a few places to ignore the listing price and that you really need to consider the After Repair Value (ARV) and subtract your rehab estimates etc.... I am looking at a few FM REO's in central NJ . One has a really good recent comp nearby for 260k and they listed this house at 254k yet it needs about 90k in repairs to become a true comp to the other. Are they just nuts? Or is there truth to the "ignore list price"
Does anyone know if FHA loans or assumable loans are given to investors?
If Freddie Mac is the seller (in a foreclosure scenario) as well as the lender, would that be a benefit to them to be pre-approved with them? I would be bringing business back to them. So, I'm thinking I can make a 15% - 20% lower offer than listed and show that they could make more money in the long run. What is their typical discount?
I am an REO listing agent in the Tampa Bay Area (I help investors buy them too) but I'd add making your contract non-assignable, and get rid of the inspection period all-together to the list.
Why Make Your Contracts un-assignable?
Banks know the wholesale game and are tired of having wholesalers backing out of contracts. Some of the banks I list for tell me not to accept assignable contracts at all. They don't even want to see them.
Zero Inspection Days
If you can't walk into a house and come up with a rehab estimate on the spot, you'd be better off waiting until you've done a few rehabs before getting into the REO game. Most experienced investors can come up with an accurate rehab budget in about ten minutes.
Of course you can bring your contractor with you when you look at the house and eliminate the need for an inspection period altogether.
If you don't have a contractor, simply put an add on craigslist that reads, "Licensed Contractor Needed by House Flipper".
Interview a few until you've found one that has done rehabs for other investors, and make sure they do estimates for free. Get references and call them. Tell them what you do, and don't forget to ask them if they have any deals they've passed on... you never know, they may have one they'll wholesale to you.
wow there is a lot to this, i think the complicated nature of an offer is exciting. I do however want more information on how to make an offer to a person or even the best way to make an offer. Do you always go through an agent?
So How Can I Offer To REO if its gonna be a whole sale deal? Which means I just need to put it under contract & sell it to my End Buyer. What kind of Contingencies i need to put on my offer? Its my 1st time doing this so hope someone can help Thanks.
Can someone comment what is still accurate from the list in 2017? Is it easier or more difficult to buy REO properties?
Don't want to go through whole list, but it much more difficult for investors.
First of all, there are much less properties - Fannie Freddie HUD banks - any distressed properties.
Then, prices are crazy - they sell slightly below market but require buyer to assume POS, pay their title fees (before they paid title insurance if the buyer chose their title co) and much more.
However, most investors don't even get to bid - it's all sold during "first look" - O/O only.
So, very seldom you can even submit an offer, and only if original offer won't go through - there is time for investors to bid.
Well, also when the price is too high for location
From my experience, it helps to offer enormous EM - don't understand why, if you close with cash - it just a prepayment 1-2 weeks earlier. However, or works.
When we offer $10K EM on $35-50K price, it's usually accepted. We started doing that after we lost bid on a property and I've seen that the accepted price was exactly like mine.
When I called the lister and ask what's that?!? he said the only difference was EM - the competing offer had more EM.
Can someone comment what is still accurate from the list in 2017? Is it easier or more difficult to buy REO properties?
Don't want to go through whole list, but it much more difficult for investors.
First of all, there are much less properties - Fannie Freddie HUD banks - any distressed properties.
Then, prices are crazy - they sell slightly below market but require buyer to assume POS, pay their title fees (before they paid title insurance if the buyer chose their title co) and much more.
However, most investors don't even get to bid - it's all sold during "first look" - O/O only.
So, very seldom you can even submit an offer, and only if original offer won't go through - there is time for investors to bid.
Well, also when the price is too high for location
From my experience, it helps to offer enormous EM - don't understand why, if you close with cash - it just a prepayment 1-2 weeks earlier. However, or works.
When we offer $10K EM on $35-50K price, it's usually accepted. We started doing that after we lost bid on a property and I've seen that the accepted price was exactly like mine.
When I called the lister and ask what's that?!? he said the only difference was EM - the competing offer had more EM.
The original post was from 8 years ago... A LOT has changed over the past 8 years...
@Joshua D. thank you for sharing this information on REO. I have been looking at getting into REO and this helps clarify/simplify the process. Some of this was common sense while other parts I had no clue. Thanks for the share