Home Buying in Riverside>Question Details

Douglas Hais…, Other/Just Looking in Riverside, CA

How to write an offer letter to buy a REO?

Asked by Douglas Haisten, Riverside, CA Thu Jan 28, 2010

I want to make an offer on a bank owned property but I really don't know how to format the letter and what the letter needs to include. Ii plan to use the banks asset manager/listing agent but feel I need to make the offer letter myself. Do I put contingencies in the offer letter? Who pays what closing costs?

Thank you,


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Do you ask dentist for helpful hints on how to pull your own teeth?

Do you ask doctors where to cut so that you can remove your own appendix?

Do you ask attorneys for helpful phrases to insert into the trust that you a drawing up yourself?

All of the answers to your question were some mutation of: “Get an experienced Realtor to help you out”. I agree. In almost all cases, it costs you nothing because the seller pays you Realtor.
1 vote Thank Flag Link Fri Jan 29, 2010
Douglas: There is so much competition for REO properties here in Riverside County that if you are not experienced you really should get representation. There is much to consider here:

Is the property even available?

What are comparables?

Are there any competing offers?

Banks don't like to pay closing costs or repairs for REO properties. So if you want to write a strong offer that actually has a chance of being accepted then the only contingency you should ask for is your inspection period. If you don't like the results of any inspections you complete then you don't have to go forward, as long as you are within the time frame of your due diligence period.
Web Reference: http://www.soreal.biz
1 vote Thank Flag Link Fri Jan 29, 2010

You may want to contact a Realtor and request that the Realtor represent you. Every transaction, whether bank owned or standard offerings, is different. The Realtor can help you determine a reasonable offer and more importantly determine how you can stand out in case there are multiple offers. Multiple offers are very common at this time.

Your Realtor can help you secure a pre approval letter from the lending institution noted in the offering. Bank owned properties often specify which lender they prefer to do the "cross qualification" letter. You have the right to use any lender you prefer, but banks are more often than not demanding a cross qualification. Several lenders were not doing their home work and giving pre approval letters without doing a credit, employment and other checks to make sure that the buyer was qualified to complete the purchase. This meant that a property was tied up for weeks or months before learning that the buyer did not qualify. Banks and sellers lost valuable time and may have not accepted a different offer that did not look as good on the surface.

Your written offer on the California Association of Realtors or other state forms will allow for your questions regarding costs and who covers the expense. It will also allow you to ask for basic and/or other repairs such as termite, pool and roof certifications, etc.

Call a Realtor and create a relationship. Realtors work on commission and will work to close the deal for you. They do not receive compensation for anything they might assist you with if they do not secure and close the transaction for you. If the Realtor knows that you will work with them they will work harder for you.

Best wishes.

Mike Teer
Web Reference: http://www.miketeer.com
1 vote Thank Flag Link Thu Jan 28, 2010
You are planning on allowing the listing agent to be a dual agent. (That is like having one attorney represent both the defendant and plaintiff.) They are the agent of the Seller (the bank is the seller).
So in order for them to represent you as well both the Bank and You have to agree to that in an Agency Disclosure Form, anything you reveal to that agent, such as I want to pay X but willing to go to Y may end up being told to the Seller they'll go to Y, or their lender states they are approved for a higher amount.

When you have an agent representing you they will council you on what you need to do to get your offer accepted. Often times your agent will draft a cover letter to show how strong of a buyer you. In a multiple offer situation this can help the listing agent know which offer they may want to accept.

As for closing cost, your agent will tell you what is customary in your area. However, Banks often times will dictate what they will or will not pay in closing. Expect to assume any repairs at your own cost. Disclosures will be minimal.

I just finished typing this and realized the date was JAN not JUNE 28th. Well anyway, did you get your home?
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Tue Jun 29, 2010
Wow, this question demonstrates the wisdom of the Net. Most of the other answers address the pitfalls of going it alone very well, but the sum of all of the answers covers the question very well. I agree that it is likely that you and your agent will have to write a bunch of offers before you get one accepted because there are far more interested buyers out there than there are available properties.
0 votes Thank Flag Link Wed Jun 23, 2010
There are some very good answers here. My first question to you would be why aren't you using an agent? As others have pointed out it does not cost you. It will most likely save you time and money. Secondly, just based on your question you don't really know or understand the process.

There are many qualified agents who would be happy to work with you and write an offer. As someone else noted, with bank owned properties there are very often multiple offer situations. An agent can assist you through all aspects of the transaction.
0 votes Thank Flag Link Mon Jun 14, 2010
Get a local Realtor to assist you in the process. There are no real
negatives for you to do this - just positive!! Time can be of the
essence in the REO process and you will benefit by leveraging
the expertise of an experienced Realtor.
0 votes Thank Flag Link Fri Jan 29, 2010

Your question has generated many responses and many points which you should consider. I would ask myself two questions:
1. What is the downside to seeking out representation?
2. The seller (in this case the bank) has representation looking out for their best interest, why wouldn't you want that same benefit?

Knowledge is power and the more you have the more you will benefit.

April Tavares, GRI, ASP
Realtor, DRE #01742179
Web Reference: http://www.AprilTavares.com
0 votes Thank Flag Link Thu Jan 28, 2010
Hi Douglas, the previous agents are right on the money with there comments on buying a Bank owned property. I personally closed 23 buyer sides in 2009 most of those on Bank owned properties. One of my clients had written sixty offers with another agent before meeting me. The second offer I wrote for her on a Bank owned home was accepted. I had another client who had been working with an agent for months and within two weeks I had her in escrow on a Bank owned home. If you are looking for an agent who is agressive and experienced in helping buyers purchase Bank owned homes contact me.

John Shackelford
Prudential California Realty/Riverside
Email: johnshack@verizon.net
0 votes Thank Flag Link Thu Jan 28, 2010
Douglas, please get your own Realtor. You don't pay them. The seller does. Not being represented on a home purchase can be very costly to you. The listing agent has a relationship with the seller that legally requires that they do their very best to get the highest and best price and terms they can to benifit the SELLER. In some states it's not even legal to represent both sides due to someone not being fairly represented. Some banks wont even allow their listing agent to represent the buyer because they do not want to get involved in any possible litigation where the buyer doesn't feel they were fairly represented. Wouldn't you want a professional Realtor on your side to represent your best interest?
0 votes Thank Flag Link Thu Jan 28, 2010
If you are planning on buying a REO I would suggest getting in contact with an experienced buyers agent to represent you. It costs nothing to you and they take the hard work out of finding your home. Yes, contacting the listing agent is great but by the time you have contact them they have already received multiple offers on the property. Good properties sell in about 3 days so be prepared to be writing multiple offers. As far as closing costs go your going to want to pay for them because you will have a higher chance of getting you offer accepted. Here is some helpful information of what your agent should be doing for you to get you into your new home http://www.vgrouphomes.com/atj/user/AdditionalGetAction.do?p…

John & Sarena Villaescusa
Keller Williams Realty
Cell: 562-818-2671
Email: Johnv@kw.cvom
Website: http://www.VGroupHomes.com
Web Reference: http://www.VGroupHomes.com
0 votes Thank Flag Link Thu Jan 28, 2010
You are free to do what ever you want, so the below is NOT intended to discourage your efforts.

However, if your question is about writing a "letter" to the bank expressing your interest to buy "1" REO property, then I would say don't waste your time. Find an experience agent and work with him/her to help you to submit offer(S). You will need to submit multiple offers on multiple homes before 1 would be accepted.

First, banks are not real estate brokers, they don't want to be, so they outsource the selling of their assets to local real estate brokers.

Second, banks are restricted by federal and state banking laws, so all their transactions are completed on legal documents...not just a simple letter. So you will need help to review and understand these legal documents to protect your "buyer" position, including your cash deposit.

Third, asset managers just want to know what's your offer? Each asset manager is managing "thousands", if not hundreds of thousands of homes...so they don't want to know your whole story....to them the house is just a piece of paper...but to you...it's a house that could be filled with memories.

Fourth, when the banks' asset is an REO, the bank is already at a loss position. So it is merely trying to recover as much of the loss as possible. So asking the bank for closing costs, repairs, etc. will lower your chances of their acceptance of your offer. Again, I'm not discouraging your efforts because every transaction is unique, however, this is one of 2 main reasons (the other is all cash purchase) why investors consistently out bid individual home buyers.

I hope the information helps.
0 votes Thank Flag Link Thu Jan 28, 2010
To put it briefly, the best idea is to find a Realtor who you can trust to help you draft an offer. They will answer any questions that you have specifically, and put the paperwork together so that your best interests are protected.
0 votes Thank Flag Link Thu Jan 28, 2010
Good morning Doug. I agree with all these suggestions. The listing agent assigned to the seller or bank, has their own interest at work, to get the most with least back to the buyer. A buyer's agent is paid by the seller, which in turn costs you NOTHING but your time! And, your best interests are at work. The things you have to consider in writing an offer is to ask for the least possible that you need, as to be competetive in your offer. Most homes have multiple offers and eventhough the homes may be here on Trulia or any other website, does not guarantee their availibilty to take any more offers. There are guidelines that the MLS holds us to as far as changing status, which is when we get the fully executed contract from all parties, sometimes taking as long as 4 weeks. It is a great idea to get someone to represent you, even better if you have friends, family or coworkers that may be able to suggest someone they know to refer you to. Good luck!
0 votes Thank Flag Link Thu Jan 28, 2010

REO companies and their asset managers do not negotiate with individuals, only through their selected REO agent. Contact the listing agent or, preferably, get yourself a buyer agent representative to make your offer. In general, you will pay your own closing costs or negotiate part of it into your offer in the form of a seller's concession.
0 votes Thank Flag Link Thu Jan 28, 2010
If it is listed with an agent, they will be able to draft up an agreement of sale for you. However, the bank if listed is generally offering a co-op (money to pay a buyers agent) so have you considered hiring your own buyers agent to represent you.

Sometimes it is best to use a buyers agent versus the listing agent. All depends on your comfort level and knowledge of what you are offering etc.
0 votes Thank Flag Link Thu Jan 28, 2010
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