20-REO Reality Check-What Really Matters Legal Issues

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Know the market. Do a thorough comparative market analysis on the subject property prior to writing the offer. Look for trends — in the market steady, declining? Look at the last two to three months’ sold’s as well as the current pending sales. Many banks are using a tactic that results in a lot of activity and multiple offers. They get two appraisal values (market and liquidation). Then they have the REO listing agent list the property at the lower appraised value which attracts multiple offers and ultimately drives the final sales price up and sometimes over the market value.

Verify availability and multiple offers. Obviously, it is important to determine whether or not the property is still available or if there are multiple offers before writing the offer. Counsel the buyer accordingly and let them determine if they want to compete for the sale. Read any agent-to-agent remarks in the MLS for any specific instructions when writing and presenting your offer.

The actual offer package. Legibly write the offer — or better yet, use typed or online forms. Ensure your offer is complete and spells out in clear, concise language the terms and closing costs. Consider scanning and emailing your offer vs. faxing it for the better readability factor.

Seller concessions and closing costs. Encourage the buyer to write his/her best offer first. It really is all about the final net to the bank. If the buyer is requesting closing costs, prepare the buyer that to compete with multiple offers she may need to write an at list price or above offer. Some banks are only willing to pay certain closing costs and are countering with the buyer to pay for what would normally be considered customary seller costs.

Inspections and repair costs. Write the offer with a reasonable due diligence period (five to seven days but no more than 10 days). The bank may limit or counter repair costs. We recommend including this clause or something to the same effect: “Seller to make, at their expense, any lender-required repairs as a result of the inspection or appraisal.”

Quick Quiz

Fill in the Blank:

Do a thorough market analysis on the subject property prior to writing the .

Earnest money. Have the buyer write the EM check for at least what is requested in the MLS. Ensure you have a current (not stale-dated) check if you have been writing a lot of offers and in the REO game for a while.

Buyer pre-approved for financing. Pre-Approval (not pre-qualification) of the buyer is a must and proof of funds letter can also strengthen your offer. Don’t waste everyone’s time if the buyer is not willing to get the financing in place and approved first.

Seller/bank addendum. REO properties are sold as-is, no warranties or guarantees. You may be able to get the seller to pay for a home warranty — it depends on all other concessions, costs, and net to the bank. We are finding many banks will not complete disclosures required by Nevada statutes: Seller’s Real Property Disclosure for example. Be prepared to carefully review all of this with your buyer and other languages in the bank’s addendum to the purchase agreement.

Timeframes. Allow a minimum of one to two weeks to hear back from the listing agent regarding a response from the bank. If the bank accepts your offer, expect that you may only receive a verbal or email counter and/or acceptance subject to the buyer executing the bank’s addendum and accepting any other terms. Once you have approval, open up the escrow and get the buyer going on their due diligence. Also be prepared for a closing time frame of 45-60 days or more depending on whether or not there are any issues to deal with like liens, judgments, or other clouds on title.

Communication. Saving the best for last! Here is where your patience, tenacity, positive attitude, communication skills, knowledge of the REO process and how well you have educated your buyer will come into play. Communication, or rather the lack thereof, is the biggest complaint and issue of everyone diving into the REO market.

The bottom line…

If all of the above statements are true, then in the infamous words of Forrest Gump — “Life (REO) is like a box of chocolates, you never know what you are going to get.” Each REO experience has the potential of being anywhere from a dream to a nightmare. I for one believe we can all make the experience more of a dream by the way we handle ourselves personally and professionally.

Educate yourself and your buyers and, if necessary, the other agent! Set realistic expectations — and focus on what you want, not on what you don’t want.

Some REO agents are overwhelmed and may have bitten off more than they could chew too fast. Some of the seasoned REO veterans are experts on the process and working diligently to improve and expand their services as their business has grown exponentially

  • Still, other REO agents have broken the code and have excellent systems in place to handle all the additional tasks and requirements for success
  • Many agents are aggressively trying to break into the REO market and may be relatively inexperienced – learning as they go or on their first batch of REO listings
  • Many buyers agents are not educated to the process and maybe writing their first REO deal with an agent who may or may not understand the process themselves
  • Not everyone is equally schooled and skilled at educating the buyer on the REO process

We are all doing the best we can with what we know and what we’ve got… practice patience, compassion and focus on solutions.

Educate yourself and your buyers and, if necessary for?


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