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How To Be Prepared to Purchase an REO or Short Sale Property
How to write your best offer by understanding what banks look for in an offer!
Here’s your checklist to be sure you write your best offer:
- Know up front that the property is being sold “AS IS.” This is why you are getting a good price. Mark your contract “AS IS.”
- Read the bank addendums and understand ahead of time that no changes can be made to their addendums. Each bank has specific bank addendums and requirements.
- Taxes are always prorated at 100% of the last known tax bill.
- If you are buying cash, be sure to have your cash verification IN WRITING ahead of time to write your offer. Without this verification, your offer will not be accepted.
- If you are buying with financing, be sure to have your PRE-QUALIFICATION OR PRE-APPROVAL LETTER in writing ahead of time. Without this, your offer will not be accepted.
- Understand that property condition is important to the type of financing that will be acceptable for the property. If the roof leaks and there are problems with the plumbing, you will not be able to buy using some forms of financing. Be sure you make your loan officer aware of the condition of the property when completing the pre-qualification.
- If you own another property and are purchasing with financing, your pre-approval letter will need to state NOT contingent on sale or close of your current property.
- No survey is provided by the bank. As a buyer with financing, your lender may require a survey. You will need to order and pay for the survey. If you ask the bank to pay for the survey, the price you offer will be reduced by that same amount for their net.
- Closing costs-If you ask for closing costs to be paid for by the bank, your offer will be considered at the net price that you are offering after closing costs.
- The seller orders the title insurance. Unless the property you are purchasing is VA Vendee. In this case the buyer pays for the title insurance.
- MOST IMPORTANTLY~Understand that REO contracts take time for decisions to be made and responses to be sent back. The bank may be working with another client who will need to make the decisions as well.
REO and short sales each have very specific requirements for you as the buyer.
- Get pre-qualified. Banks and asset management companies want buyers who can afford their properties. The companies expect that a pre-qualification letter will be sent with each offer that is presented. Without this letter, your offer will not be accepted. Without this letter, you could miss the property you wanted to buy due to not being prepared ahead of time. Agents work with qualified buyers.
- Be sure your lender knows the condition of the property to determine the type of financing to use. Be sure that the condition of the property matches the type of financing you want. If a home has leaking pipes or peeling paint, you will not be able to use some types of financing.
- Have your agent explain the process of purchasing a property from the time that you start looking to the final closing. REO and short sales each have very specific rules that must be followed for your offer to be accepted.
- Know where to find properties that are within your price range. Agents have the best source for finding you your next home.
- Be sure that you and your agent do your homework to understand the value of the property that you want to purchase. Ask for comparable properties and understand the differences between them for the value.
- Know that REO and short sales are already priced right. The sellers take into consideration all of the repairs that the property needs.
- Be sure that you have a home inspection. Properties are sold “AS IS WHERE IS” with a home inspection. After the inspection, you can decide if you want to proceed to purchase the property. The agent can determine how to proceed once you know the condition of the property.
- Be sure that you continue to work with your agent and your lender once your offer has been accepted. You will have a specific time period to have your full approval completed to close on time.
Note: This information provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.