Foreclosure in Downey>Question Details

In The Hunt, Home Buyer in Downey, CA

Me and my husband just put in an offer for a REO...its been officially 3 days since we submitted it and we have not heard back. Luckily the listing

Asked by In The Hunt, Downey, CA Wed Feb 24, 2010

Me and my husband just put in an offer for a REO...its been officially 3 days since we submitted it and we have not heard back. Luckily the listing agent is our agent and he was able to tell us somewhat what, what the other offers looked like. We don't wish to max ourselves out, but we went it with a strong offer in our opinion. The following is the 3 offers submitted for a house in Downey, CA @ L/P $256,000 which do you think is the best one? 1st client submited a CASH OFFER OF 250,000 flat. The second client submitted an offer of 285,000 and is requesting the seller pay 4% of closing cost. The 3rd client submitted an offer of 274,000 with seller to pay $5000 of closing cost. Which is the best offer and will most likely win?

Will the fact that ours is a FHA loan affect the Reo deal?

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11
Benny Chavez’s answer
Wow! Your question is complex in the fact that the answer all depends on the condition of the property. Also the full details of those other offers come in to play as well. Details meaning what requests if any are being made of the seller for example: termite report and completion, water heater strapping and smoke detector installation, or city presale inspection and completion of requested items. Also how much skin are those offers willing to put in the game as a $$$ deposit? Two other important items that could affect the offers are loan contingency and appraisal contingency time periods if any. If all the offers are FHA and the property requires a ton of lender required repairs and the buyers have not agreed to perform those repairs in their offers, it's possible that the cash offer would win. Again property condition is the first determining factor of what offer will be accepted. To make it simpler the highest seller neting $$$ offer with the least amount of requests and easy buyer outs, with shortest guarateed time in escrow is 9 out of 10 always going to win! Hope this helps!
Web Reference: http://WWW.BENNYCHAVEZ.COM
0 votes Thank Flag Link Tue Aug 10, 2010
It depends solely on the lender. At least you don't have some REO agent who won't get back to you for two weeks and provide you with any information until you see it pending on the MLS. This seems to be happening more frequently. I have discussed this with other agents and do not believe it is ethical to do.

The other answers provide a good explanation. I have seen quite a few times where an all cash offer is accepted over any other type just because it is less trouble and faster. Again, it does depend on the lender.
0 votes Thank Flag Link Sun Jul 25, 2010
Good question for your realtor but here's my two cents worth.

Anything to do with REOs generally takes time, but if your offer is rejected you might have an opportunity to submit a counter offer. If you based your offer on market value? You may find properties that are "hot" and getting a lot of offers. If I was the selling bank, I would chose the offer with the most cash for me, that is, $274K less $5K - wouldn't you?

The seller/bank shouldn't know if you're using FHA or not. Cash offers aren't necessarily better as they may not be real. If you presented a strong mortgage loan pre-approval then you'll be given serious consideration.

I hope this helps, and good luck!

Tom
0 votes Thank Flag Link Thu Feb 25, 2010
The Banks are difficult to figure-out sometimes. Often, it's not the highest Number that gets the deal, but rather the most-reasonable Number coupled with the easiest TERMS. A lower CASH Offer can often trump a higher FHA Offer because the Bank knows there will be fewer potential "snags" with the deal. It sounds like your Realtor is quite familiar with REO property and so you are probably getting very good advice from him. Keep listening to your agent and following his direction. I';ve got a feeling that you'll moving into your new home soon!
0 votes Thank Flag Link Thu Feb 25, 2010
Downey Home Buyer:

First, Congratulations..... you have made a wise decision in deciding to purchase at this time. This is a great time to buy!

The fact that you are submitting an FHA offer should not affect things if the property is in good shape. If the property is a fixer you may be in trouble. Remember, FHA wants properties in tip top shape for their clients. If the property needs a lot of work the FHA appraiser will require these items to be repaired. The banks know this and knows if they accept an FHA offer the approximate amount that will need to be spent to fix these repairs. So ultimately it comes down to the banks net after all expenses...Period.

Good Luck!

Jimmy Spathos
Broker/Notary
Lic#01296368
Prudential 24 Hour Realty
562-400-2148
Web Reference: http://www.jimmyspathos.com
0 votes Thank Flag Link Thu Feb 25, 2010
The bank is looking for the amount that they will wind up with in the end, how long it will take to get it, and how sure it is that it will close.

Cash deal can close in 3 to 4 days with no title issues.

Conventional loan can take 30 days on average.

FHA loans can take 45 days on average.

In the end, the bank is looking at 250k, 273k, & 269k minus closing costs as nets. With a strong preapproval, the 285k offer with no other conditions will probably win out. Banks are fickle, so you never know!
0 votes Thank Flag Link Wed Feb 24, 2010
Only your agent can provide you with an answer. The question is how strong or how serious are the other offers? There are buyers out there who will back out as soon as they get their offer accepted regardless of the amount they offered. Your offer may be the lowest, but 100% serious about moving forward compare to the highest that will back out as soon as the listing agent notify them of the acceptance.

Good Luck and don't give up if you don't get this property.

Charita King
562-276-8681
0 votes Thank Flag Link Wed Feb 24, 2010
Hi
These are all a good answer in summary...the bank wants highest net for lowest risk. Period.
If the listing agent is representing you as well...they will likely support your offer strongly but they will have to provide for the bank the reasons your risk is best and if you are FHA risk is typically higher. However, control of the transaction is appealing to the bank as well. This listing agent would have data and control of the transaction on both sides and would know you aren't out shopping for other deals as well and that could be a plus too.
Good Luck
Laura Myers
Keller Williams Arizona Realty
480-600-6213
0 votes Thank Flag Link Wed Feb 24, 2010
It is my experience that each REO bank has different criteria for offer acceptance. However, generally speaking Cash and Conventional financing will win out over FHA almost every time. Sellers are concerned about FHA appraisal "required repairs", which seem to be cropping up more and more often these days. Additionally, Sellers know that if the home does not appraise at full offer price, the FHA buyer does not have the option to close the gap with cash.

Having worked with many FHA buyers, here are some ways to make your offer stronger.
1. Make a 3% good faith deposit. You have to pay the 3.5% down payment anyway, so showing that you are serious by putting your money on the table up front goes a long way.
2. Get pre-approved by the seller's preferred lender (and use them if you can).
3. Shorten your inspection periods to 5 - 7 days. Make sure to line up your inspections when you submit the offer. You can always cancel or reschedule, but the seller likes to know early on if you are going to request repairs.
4. Do not request termite work. Make sure one of your inspections is a termite insepction (most termite companies do not charge for these). That way, if there is a ton of termite damage you know in advance and can either request it in repairs, walk away, or budget to do the work after closing.
5. Pay the extra $$ to expedite the FHA appraisal. This way you will have the FHA required repairs early and can negotiate on those immediately (within the first 5-10 days).

If you have a great realtor, they will be able to help you pull this off. Good luck and Dare to Dream.

Shel-lee Davis, CDPE
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
http://shel-lee.listingbook.com
0 votes Thank Flag Link Wed Feb 24, 2010
In the Hunt,

Good Luck! Lots of unknowns. For instance what are the credit scores and reserves of the two offers not paying cash. If their scores are very strong, the higher offer may win. Where are the comps priced? Would the highest offer appraise?

I think you are going to have to wait this one out.

Best of luck,
April Tavares, GRI
Realtor, DRE License #01742179
Web Reference: http://www.AprilTavares.com
0 votes Thank Flag Link Wed Feb 24, 2010
It's up to the bank, so no good way to answer that. Every bank works different and only they know what they are looking for

If I were the bank though, here is how I would rank potential offers

1. Cash offer - it's within 5% of the list price and not subject to any contingencies other than probably an inspection. This is a sure thing for the bank
2. Conventional financing - depends on the down payment and seller concessions. Large down payment with fewer concession means less hassle in getting financed
3. FHA financing - FHA loans take longer to process and the home needs to meet minimum property standards so sometimes FHA appraisals come back requiring repairs, which a bank is hesitant to do

As the saying goes, "Cash is king". Even if the other offers are higher, remember the home needs to appraise that high. And with appraisals these days a lot of appraisers are hesitant to bring in a higher value knowing that the home was listed at $256k. The price increase needs to be justified.

I sure hope you guys get the home, but if not keep your head up!
Tony
0 votes Thank Flag Link Wed Feb 24, 2010
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