What to Say to Lender's REO rep?

Question

For years, I've been wanting to buy a certain house in my neighborhood. It would be owner occupied (my family). It's available as REO. I come from a family of RE agents who all said I was wasting my time calling & faxing letters to the lender, that the lender would ignore me, & I should just wait for the house to go on MLS, then we make an offer. To everyone's surprise, their REO bigwig emailed me & said he will call me this week! He seems willing to work directly w/us to make a deal. No listing agent or MLS. My family says this is unusual, so should I be worried -- or happy we've gotten this far? We're new to REOs and I've heard they can be super frustrating, but I really want this house! REO at 775K, rehab cost 27K, we'd give 7K earnest money and down pmt of 30-40%. Any suggestions for an offer price? Thanks!

Jimmy H. · Answer

Hard to say without knowing the house, neighborhood, etc.

If the property is already bank owned I would recommend checking out your local county's "master commissioner sale". That is what it is called in my county, yours may be a bit different, it is the foreclosure sale where the bank purchased the property. You can also go online to your local property valuation administrator or county auditor and see what the bank paid.

Often times a bank sets an internal number at which they are willing to buy the property back, that they will not bid beyond at master commissioner sale. You can get a good idea of what they thought the property was worth by what they bid and acquired the property for.

My only advice would be to use this as a start, and don't be scared to low ball.

You have direct contact with the special assets guy at the bank, he will be avoiding approximately 5% commission and $1,000-$2,000k at least for attorney fees etc. So keep that in mind, put in a low offer, if rejected then negotiate with the guy. I think its very good you are in direct contact with the guy, not something to be concerned about, definately a plus.

Francis Dai · Answer

If it's in a Western state and the foreclosure sale happened within the past 5 month, I can help you look up how much the bank tried to sell it at foreclosure for on Foreclosure Radar.

Steve Babiak · Answer

No, don't send them any comps or CMAs.  Do send the POF, they will want that.

Let them determine the value on their own.  Only use your comps if you really need to counter to a counteroffer they give you.

Typically, these lenders internally use some automated valuation model, and they can be all over the place.  If it's in your favor, don't tip them off.

Michelle P. · Answer

Thanks Jimmy and Steve. These are great insights and suggestions. I'll do some more research and try to be prepared for when the REO rep calls. I'm thinking that if the call goes ok, we should just prepared an unsolicited offer pkg complete with CMAs, comps, POF etc, scan it all and email it directly to him & see what response we get. Think that's a good idea? Thanks again!

Steve Babiak · Answer

From my attempts at doing similar, they are more than happy to sell without having to use the MLS and a listing agent - but they really get stuck on getting the specific asking amount for the house.  If you are willing to pay what they are asking, or really close to that amount, you might get to a good purchase.

When you don't come close enough to their asking price, they know the MLS will expose the property to a far wider sample of potential buyers, and they hope to find somebody that way to pay close to asking.

Don't overpay just to buy this way.  Stick to your maximum purchase amount.

What to Say to Lender's REO rep?

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