When buying these properties as a real estate investor or home owner, it is important to make sure your offer will be accepted.
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.
This must be your first step because no bank will talk to you without it.
2) Get a good real estate agent
Most properties for sale by the bank are listed for sale by a Realtor. So any offer you make will have to go through the Realtor.
You therefore need your own Realtor to help you make the offer(s).
3) Do your due diligence
A great majority of REOs need few or no repairs. You must do a good repair estimate. This will be helpful to negotiate a better price.
You will also need conservative comparable sales to back up your offer.
4) Order an inspection
This is a must when buying REO property. Banks will not fix up houses, but a happy to give a discount for repairs.
Make sure your real estate contract has inspection verbage to get you covered.
Most likely, you will discover problems you were not aware of from the inspection. You will need these to get your offer price lower.
If your offer requires the bank to fix the property, it will be rejected. 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 there is a home owners association, make sure dues are fully paid up, and prorated at closing. In foreclosed properties, it is common for fees and fines to accumulate.
Ensure you get these fees credited at closing.
Also make sure all taxes are paid. Make sure you get a prorated credit at closing.
Lastly, make sure the utilities are paid up; you could be stuck with huge bills that were not cleared by previous owner. Be sure to clear these.
6) Make offers lower than the asking price
Banks are willing to negotiate. Always offer lower than the asking price. Properties that have been sitting in the market for a while will be more discounted.
Do not offer more than 10% lower than the asking price. And if your offer is not accepted, you can make a higher offer depending on the bank's counter offer.