8 Guidelines for REO Foreclosure Offers in Houston, Texas

Tons of knowledgeable family home buyers would like to strike the jackpot and buy that REO real estate foreclosure, quite a few of which are commonly under-priced. When banks price REO foreclosures under the equivalent sales, various offers are normally the response. This would mean you could be up against firm competitors for that bank-owned home.

It's definitely not uncommon for some REO foreclosures in Houston to receive 15 or even 20 offers. Many times the bank might throw out all but not one but two offers and then require the particular buyers to resubmit what is referred to as "Highest and Final" offer. Oftentimes the financial institution only accepts the best offer at inception.

In case you are curious about how one can get your REO offer shine above all the others and become the winning offer, why not try these stategies to enable you to pick the best price and terms:

1) Get the Property Record of that REO Foreclosure

Ask your buyer's realtor to find out the bank's purchase price on the Trustee's Deed or Sheriff's Deed. Generally, it's listed within the document itself, which you may obtain from the tax rolls or maybe a title company. Examine that value to the price tag your bank is asking.

Check out the amount of loans that were once secured towards real estate. Somewhere within the original mortgage balance(s) and the foreclosure sale amount is the amount the lender will agree to, if the home is under-priced.
2) Figure out Comparable Sales for the REO Foreclosure

On many occasions, the list price seems to have very little impact on the value of the property. The marketplace value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.

Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO foreclosure is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.

Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.

Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.

3) Analyze Listing Agent's REO Solds

Most REO realtors work for 1 or a couple banks. Certain listing agencies are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.

Ask your buyer's agent to look up the listing agent in MLS.

Run a search using that listing agent's name to find the last three to six months of that agent's listings.

Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.

4) Ask About Number of Offers Received for that REO Foreclosure

If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.

If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.

5) Submit Preapproval Letter

It goes without saying that you do not want a prequal letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.

Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don't trust other lender preapprovals but trust their own departments.

6) Don't Ask the REO Bank to Pay for Repairs / Inspections

Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted.

7) Shorten the Inspection Period

If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.
8) Offer to Split Fees wit the REO bank

Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.

Many banks negotiate discount fees for title insurance. If the bank will pay for the owner's policy, the ALTA policy might cost a bit more. But it's still a good idea to let the bank choose title if you want your offer accepted.

Give some thought to the Appraisal Effects

In case you offer above list price, bear in mind that the appraisal should substantiate that price. When you are dealing with a very low appraisal, you've got alternatives, so don't fret. Bear in mind, your banker is likely to come upon this problem with the next buyer who obtains financing.

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