Buying a foreclosure offers definite benefits to homebuyers; especially first time homebuyers that want to get into the market. Once you decide that a bank-owned property is the right option for you, we recommend that you review some of these Do’s and Don'ts.

• Do your homework; know how much house you can afford before you shop
• Get pre-approved for a home loan and make sure you have a pre-approval letter in hand when you make an offer
• When you identify the REO property you’re interested in bidding on, ask your Realtor to determine fair market value on the property.  Find out how many offers are on the REO property.  It’s not unusual for an REO home that is priced right, in a prime location to get dozens of offers. It’s also not unusual for the bank to narrow the field of competing bids to two or three offers and require them to submit their highest and best offer. Going into the negotiation with a “highest and best offer” mentality at the onset will enable you and your agent to better beat out the competition.
• Find a Realtor who has experience working with REOs and that is savvy about the competitive REO bidding process.  With REOs Patience is a key virtue . . . get used to waiting. It is not uncommon for it to take an offer on a property to take up to 2 weeks to actually become "ratified"!  An experienced Buyer’s Agent will not drive the REO agent crazy by calling them every day demanding an answer.  They will know to be patient because they UNDERSTAND THE PROCESS.  An inexperienced, pushy Realtor could put your chances of success in jeopardy by driving an REO Listing agent nuts! 
• Make sure your agent is knowledgeable about bank addendums.  They are written by and in favor of the banks.  Be aware that the usual inspection and loan contingency clauses are generally modified.  The removal of these contingencies might even become passive instead of active - meaning that if you have 10 days for your physical inspections, when that day comes and goes if your Agent does not respond timely, it is assumed you have ACCEPTED the property and any conditions that exist! 
• The bank will generally provide a termite inspection.  They will allow you to have all the inspections you want, (roof inspections, mold inspections, etc), just be prepared to pay for them!  Get them out of the way as soon as possible.  Most REOs are sold in their As Is condition so be mindful of your lender's required repairs as well.  Make sure the property will qualify for your particular loan.  For instance, a property with no appliances and/or no floor covering will not qualify for an FHA loan.  Not only does the Asset Manager know this, but the REO Listing Agent absolutely knows and will expect your agent to as well!  So don’t waste their time submitting an FHA offer to them unless it is a 203k rehab loan.  Your offer won't even be presented in most cases!     
• Credit for non-recurring closing costs should be limited to a maximum 3%. The average lender feels that most of the REOs in their inventory are there because of cash strapped Buyers purchasing properties that they did not even have the down payment for in the first place.  And the last thing they want is to see that property back in their inventory again.

Let me stress, the most important tool you can have in your REO home buyers tool kit is PATIENCE!  And this goes double for the agent representing you!  If you both get impatient and frustrated, get a bad attitude with the REO listing agent, demand  an immediate response, and daily update calls - then charting your path to homeownership via REO is Not For You!

As previous Asset Manager and now an REO agent, I’ve had Buyer Agents so impatient and over-eager that I started to think they were off their medication!  They harassed me, I forwarded their hourly inquiries to my Asset Manager and needless to say they did NOT get their offer accepted.  My Asset Manager began to think, "Geez, do we want to work with this nut case for the next 30-45 days??!!" Remember, the bank is looking for the path of least resistance and if it comes down to it and the Asset Manager asks me which agent I would prefer to work with . . . Guess what?  Any obnoxious, inexperienced agent with a bad Attitude is toast . . . meaning so is YOUR offer!  So if an Agent wins your confidence by boasting about how they haunt the REO agent until they get an answer, you might want to rethink using that agent, because it can negatively work against success in achieving your goals.

If you have any other questions, please contact us.