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.
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Five Tips for Making REO Offers That Get Accepted
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 REO 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.
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