In today’s real estate market, most banks have more houses in their inventory than they can handle. They are selling more houses than anyone else in a market with very few buyers.
Making offers that these banks accept is therefore important whether you are a real estate investor or a regular home buyer.
These tips will help you make successful offers to the banks and buy REO houses cheap.
1) Get pre-qualified
When you are buying a property from a bank, you must first be pre-qualified, or show proof of cash.
The bank will not consider your offer until you get this, so this should be your first step
2) Get a good buyers agent
Almost all, if not all, bank owned houses are listed for sale by Real estate agents. So any offer you make will have to go through the Realtor. You must therefore get a good buyers agent to work for you.
3) Do your due diligence
Lots of the properties bank have need little or no repair. Be sure you check to make sure no repairs are needed or do a good repair estimate. You will use these to negotiate a better buying price.
Of course, you must have conservative comparable sales to back your offer if necessary.
4) Order an inspection
Consider this a must when buying a REO property. Banks will rarely fix up houses, but will offer them at a discount when possible.
Make sure your real estate contract has inspection verbage to get you covered.
An inspection will bring out issues you were probably not aware of. This would be a strong bargaining point with the bank which should also bring down your offer price.
Banks will not accept offers which have conditions that they fix the property. You buy this type of property as is where is. Make sure your contract shows this. They will offer discounts based on needed repairs.
5) Other costs
If the home is in a community where there is a home owners association, make sure that all dues are paid up, and your fees will be prorated from the day you own the property. In foreclosed properties, it is common for fees and fines to accumulate.
These costs should be credited at closing.
Similarly, make sure there are no back taxes owed. Again, these fees should be prorated and credited at closing.
Lastly, make sure the utilities are paid up; you could be stuck with huge bills that were not cleared by previous owner. Make sure this is cleared.
6) Make offers lower than the asking price
Banks are willing to negotiate. Always make an offer lower than the asking price. Properties that are older in the market will be more discounted than those that are just listed.
In general avoid making more than 10% lower than the asking price. If your offer is rejected, you can always offer a little more depending on the bank’s counter offer.
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