The type of financing you're getting also plays into which offer the REO bank is going to accept. If you're getting an FHA loan, for example, your chances on winning the bid up against all Cash or large down Conventional buyers is tough. I did a study & actually sifted through 200 sales in X city & found that about 6% of all sales were sold to FHA buyers. My results did include all types of sales, not just REOs.
I strongly suggest taking a break from the REO homes & focus on short sales. There's less competition & if yous is the offer that's accepted by Mr. Smith (the owner of record) you have a better shot of getting a lower price than the REOs!!
You need to, however be working with an agent who specializes in short sales. If I were working with you, I would narrow down the exact areas you're looking in, narrow it down to what size homes you want & see who's defaulting on their loans in that area & also see who is incredibly underwater, THEN, go list the home myself & bring you in as the buyer. No competition, You Win! Then it's just us vs. the bank to negotiate the price.
Email me directly if you'd like to talk about this some more.
Realtor Since 1996
Short Sale Expert
Remember this too, at the very end of the process, the apprasial will come back and if it is less than contract price the seller pretty much as the choice of lowering the price or the deal is off. It is the last card up your sleeve as the buyer, and part of the reason it is called a "buyers market".
Best of luck.
Are you working with an agent, specifically an REO buyer agent? I'm not suggesting anyone in particular, just someone who writes offers on REOs day-to-day. The terms of your offers are just as important as the price, and an agent with experience in these will make a difference. Many of the REO listing agents are used to working with these people, and can give an asset manager an extra vote of confidence in the offer when it is submitted. I know many agents disagree with me on this, but if you are interested just do a google search on it. Investors use these agents for a reason. Good luck and hope the next one works out for you!
There's no exact strategy. Just prepare yourself with your loan approval from a direct lender, your down payment, and your closing cost. And be alert with new listings and "BOM" listings in the area that you're cosidering. I would suggest to offer on short sale listings, you might get a great deal. Just don't give up. Be realistic and persistent.
Have a blessed day!
My strategy for winning offers has the following pieces, in some form, every time, with every buyer. It is dependent upon a trust-based relationship with the REALTORÂ® representing you, and getting all of your "ducks in a row" before making an offer.
1.Start with a pre-approval (not pre-qualification) from TWO lenders: the one who you have been using all along, and a second lender. The first pre-approval is obtained prior to beginning the property search, and is used to pinpoint how much you can afford to spend on your purchase. The second lender should be EITHER the bank/seller on an REO property, or an INSTITUTIONAL LENDER (such as B of A or Wells) on a retail sale. Its purpose ids to satisfy the seller/ bank that you are legitimate in their eyes, or to show the retail seller that you are solid gold. Be sure each pre-approval letter lists your name, the property address, and the purchase dollar amount. Update the information with each offer/ counter offer, as it changes.
2.On an REO property, ask the listing agent if a internal bank appraisal has been done on the property, and if so, do they know the value.
3.On either type of property, I always prepare a thorough Market Evaluation (CMA) with all of the most recent comparable sales, and help my buyers set a value on the property, both so they will know what they will bid, and so they will have a good sense of what the property will appraise for when they obtain their new loan.
4.BEFORE beginning negotiations, set a maximum that you will pay for the property. Beyond that value, be prepared to walk away, without looking back. Some properties are not meant to be, and a buyer needs to feel in control of the process. There may always be someone willing to pay more, but that should not affect your decision. This is, after all, a business transaction, and it should make good business sense for your family. The moment it doesn't, WALK AWAY. Another property will come along.
5. Buyers should always write a letter to the home seller. Your real estate agent should always write a separate letter to the listing agent highlighting your purchase offer.
6. Write your cleanest and best offer (or counter offer). Your pre-approval told you how much you can afford. Your CMA told you how much the property is worth in today's market. You have set the maximum value you are willing to pay. Now select terms that protect you, but are as attractive to a would-be seller as well. You can never compete with an all cash buyer or investor, so realizing that frees you up to write YOUR best offer.
7. Never, ever use round numbers in your price. Everyone else does. It makes your offer more mysterious to the seller when they see an uneven number, and banks assume you have some formula for assessing value. When it comes to counters, you may win by that extra $1682 you tacked on at the end!
8. If someone else gets the property, the hardest part, as I mentioned above, is to walk away without looking back. Know that you did your best. You and your agent made a strategy that was appropriate for you, and someone else got the property. Take comfort in the planning you did, and the knowledge you have about your situation, and know that something else will come along. Count this one as preparation for the next offer, a rehearsal of sorts, that will season you and make you a more savvy purchaser.
Best of luck,
The Bremner Group at Coldwell Banker
REALTOR, 00588885, ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
Accredited Buyer Representative|Certified Distressed Property Expert |Pre-Foreclosure Specialist Certified
I hope this helps you and wish you much success in your real estate search.
Heather Paul, Realtor
Keep plugging away. My client submitted 20 offers before an offer was accepted. he went for short sales, REO's and normal sales that were above his price point but where we thought there was some room for negotiation. He acquired a property he had written an offer on as a short sale-an offer rejected by the seller's lender which he acquired when the same property came back on the market as an REO.
Just keep at it, you'll get your property. i understand it's discouraging--not only fo ryou but your agent too. As an agent , there's nothing i like about having an offer rejected. But, just keep going and try not to get too emotionally attached to any one property.
I'm certain you'll find your perfect property at the right price and all this preliminary work will have led to that find.
Keller Williams Larchmont
Viola the new model. Focus on distressed properties in the 100k to 250k range that could be purchased at 65%LTV, rehabbed for under 25k and put back on the market at 3% under market value and they would sell in 31 days. That model worked quite well until about mid '09 whence the "Distressed Property Rehab Biz" became saturated and once again homes started flooding the market thereby causing the turn around time to jump to 50-60 days on the market.
Today the days on market is now sitting somewhere around 70+ days in many areas. Clearly there is an inventory glut in this area coupled with no so called "Stimulus" tax credit incentives so the possibility of a more competitive buyers market is all the more evident. Banks want and need to move inventory. There's plenty of product out there. You just need to find an agent/broker in your area that know how to farm the area you wish to invest in.
Clearly, you learned that there's more to buying a property than simply submitting your offer via a Realtor. Although doing that can--and often does--help, that alone won't always get you to the promise land. Investors (myself included) would rarely make any money--provided we're unwilling to take on any negative equity and cash-flow--because we'd lose most bidding wars to retail buyers like you. We use other legal methods to help improve our odds, and lots of winning strategies exist (eg tax sales, bulk REOs, notes, etc).
You might consider reaching out to 1 or more investors to buy your property, or you might consider attending some REI club meetings to learn to buy using the same techniques that we do. You could also check out properties that have been on the market for awhile. And the list goes on.
Don't get discouraged, just keep playing. With each transaction, you're getting closer to getting a deal. Even in this "Buyer's Market," there are still bidding wars for the hot properties, while other properties sit on the market for months. A great example is Alisha Chen's property on Crenshaw that she mentions below...at $177/sqft, built in 1910, this is a great property, that with some TLC could be a beauty. Ah, but location, location, location... Such is the game.
Moreover, ditto what Emily says about the the type of financing you're using. Here's a sobering example: there was an REO deal a few months back, listed at $499k (comps were about $850k). My buyer submitted an offer of $700k with 20% down conventional financing. We lost it to a $540k all cash offer with no contingencies, that closed in 14 days. Yowzah! But, keep in mind...this is only one REO situation...other banks might have taken that $700k offer with the contingencies and financing. So, the moral of the story...one never knows, do one?!
Work with a good Buyer's Agent and just keep writing offers. Remember...in real estate, 'there is always another great deal right around the corner!' Stay in the game...you'll find your home!
I am an REO agent...been selling REO properties since 2007 in LA, Orange & San Bernardino County. If the price was the cause of you not getting the property, there's not much you can do, since the lien holders & investors want the highest & most qualified offer. However, for many REO properties, there are also additional items such as bank addendums & in-house pre-qual required. Most of the offers I receive from the buyer's agents are incomplete, not legible, inconsistency of terms and delay on getting the corrected and completed documents submitted. In your case, you might want to ask your agent to give you the comps for the home before writing an offer, that is more realistic of the sold price so you are not putting time and hopes into properties that are out of your budget.
By the way, I have an REO home now on the market for a great price...check it out: 1822 Crenshaw Blvd. LA
Trust me on this. We specialize in distressed property acquisition, rehab and resale investments for a living and I can tell you first hand that even with all of our experience it's still an uphill and very frustrating ordeal. Each and every purchase is a hybrid unto istself. There is no magical template. Get an experienced and competent REO pro. and ask for referrals and look at their portfolio of past projects.
Look at the comps, and the days on the market - days on market is an indicator of a hot area or a property priced at or below market. No one wants to overpay for a house, but if you can afford it and really want the home you may have to go over list.
You can always go in as a back up offer this doesn't hold you to the property if in the meantime you find another house.
We can't comment on a particular deal, but losing out is not always a bad thing if it requires overpaying to win. In a market like this buyers need to be patient and find the right property for them at the right price or risk end up losing a lot of cash when they sell. There are three main parts to an offer:
Perception - who the listing agent/broker thinks is the strongest, and highest price does not always win in that category.
What you should be doing is working with the best agent/broker you can and have a pre-approval from a reputable and reasonably local lender to make all of those three be at their best.
Lance King/Owner-Managing Broker
I always run the comps for my clients and let them know what I think the home is worth. A list price is just that "A List Price".
Banks often price homes well below the market so they can create a bidding war and "cherry pick" the best buyer. I always tell my clients to bid with NO REGRETS. Meaning after I have run the comps and you know the value offer the maximum you are willing to pay for the home even if your bid is $5K more than the next because you truly love the home you don't want to say "Well I would have gone $5K higher" but then you didn't and you lost out.
But if someone bid one dollar higher you were perfectly happy letting go with no regrets. Everything happens for reason. Your dream house is still out there, you'll find. Good Luck.