3 of 4 Insider Secrets When Buying Foreclosures

  1. REO’s create an opportunity for Realtors as your REO Broker to provide you pre-market information, by giving you the inside track. By making you aware of properties 2 to 4 weeks before the properties are actually listed on the market and made available to everyone. This allows you the opportunity to inspect and get ready to make an offer as soon as the price is available. Understand, banks do not allow us to make offers until they give us a list price, and they do require us to list the property in the Realtor MLS computer system. That being said, once we have the list price we have up to 24 hours to actually submit it in the MLS.

The key for you is how to get the REO Realtor interested in contacting you about potential deals?

 

How do you get in on the REO Realtors’ “Inner Circle”? After all, the REO Realtor is also in business to make money, feed their family, and maximize their time. Keep in mind if an REO Realtor has been in the business for a while; they already have an inner circle of buyers, investors. Not everyone is available for every deal. So your objective is to also get included into this inner circle.

How do you do that?

 

Here are some strategies for doing just that:

  1. Put yourself in a position of credibility. Which means don’t hesitate to prove your ability to take action and buy a property. Serious people do not hesitate to prove their ability to buy. If you are a cash buyer, then provide proof of funds showing that you actually have the money. You can mark out your account numbers. This proof of funds is also required to be attached with any offer to the bank or they will not respond to it.
  2. When you are subject to financing, at a minimum a pre-qualification is required. This is simply a letter on your lenders letterhead stating basically that they have pulled a quick credit report, and asked for your financial information, and that based on that information, they feel comfortable that you have the ability to get a mortgage. Nothing has been verified.Realtors and Asset Managers have learned that these pre-qualification letters are sometimes not worth the paper they are printed on, because they are subject to verification of everything. It also depends on the quality of the loan officer you are dealing with. The problem being of course, getting near a closing and then finding out that you cannot get the financing after all, so the deal falls out. This is not a good thing! The Asset Manager looks bad to his / her supervisor, the REO Realtor looks bad to his / her Asset Manager, which could affect how many, if any more listings the REO Realtor gets in the future. Most important your hopes for this home are wiped out and you are very disappointed. I don’t want that to happen to you.

So deals that fall out are bad news! For everyone concerned.
Now you understand why a Realtor prefers (does not require) that you use a loan officer that they know and have experience with, that they do a good job and get deals closed.

  1. When you are using financing and are very confident that you will get the financing, you may make the offer not contingent on financing. It can be a like “Cash Offer” even though you are getting the money from a lender. What you are in essence saying is that you know you will get the financing, so to make your offer stronger, you are making it a cash offer not contingent upon financing, subject to only the appraisal and clean title. If you’re financing should fall through then you are agreeing to give the earnest money to the lender as liquidated damages. When making a cash offer like this, the Title Company still needs to know you are using financing to make proper arrangements to close the deal.

Imagine you are a seller and have 2 identical offers, except one is contingent on financing and the other is not contingent. Which would you accept?

  1. The next best strategy is for you to get pre-approved. This is when your lender makes a commitment in writing that they are willing to give you a loan. This approval is only subject to an appraisal of the subject property and clean title. Now even though you are getting financing, Your Realtor can present your offer “same as cash, just subject to title and an appraisal.”Now some loan officers in the market place like to use the term pre-approved loosely. They give buyers a pre-approval letter, even though nothing has been verified; it is still subject to verification of income and or credit. This is really only a pre-qualification.Also, when you know you will be buying a house that needs some work, you must inform your lender of this up front. You do not want to pay for an appraisal then have the lender say they won’t finance the deal because of the work needed. Some lenders will finance with work to be done and some will not.

    When it comes to the typical condition of REO properties, they usually need work. It can range from almost move in condition, minor cosmetics, to a lot of remodeling. The youngest one I have had is actually new construction not completely finished, to a couple years old to, I have had some built in the 1800’s. The more work an REO needs, typically the better price one can get.

    I have a lenders that do a lot of FHA 203K loans. A loan that allows only 3.5% down, and covers the acquisition and remodeling cost. Also a conventional source for 5% down and they will finance repairs.
    When you are attempting to establish a relationship with a Realtor who can be a valuable resource for you and you want to get the best possible deal on a property, then it makes logical sense to approach these opportunities from your strongest position possible.

    Help the Realtor help you. I’ve learned the tips I share herein from years of experience.

    Follow my advice, use a reputable lender and get pre-approved. Provide your statement of proof of funds, quickly and right up front. because why not?
    Establish yourself as a person of action who is serious about making a good deal.

 

  1. Offer to sign a buyer’s agreement. Which simply states that if you are to buy a house that you are agreeing to do so through your Realtor. Your Realtor only gets paid when and if you close on a purchase. This shows your seriousness about doing business and respecting the Realtors time they are investing to help you.
  2. Provide your Realtor with a pre-signed contract when considering a property that the price has not been seen yet. So that when the price is given, your Realtor calls you, you say what you are willing to pay and the price is filled in. Your offer is submitted, quick, and efficient and the first offer in!
  3. A serious buyer will provide their Realtor with a photo copy of the $1,000 earnest money check up front, it has to be attached with any REO property offer. You make it payable to the listing company. This helps establish your seriousness, and readiness to take action. The Realtor simply holds it in their file folder until an offer is accepted and signed by the seller.
  4. When given a list of addresses to check out by your Realtor for you to consider, obviously on the ones you want you’ll be calling to make an offer. When there aren’t any at the current time, you want to keep the rapport going, give your Realtor feedback on the properties. Keeps you in touch and provides information that may be helpful for your Realtor to share with the asset manager from the bank, to help get the prices lowered if needed.
  5. Call your Realtor regularly to keep in touch. Realtors work hard and long hours typically to scratch out a decent living. Don’t make them work harder than necessary. This is a person who can help you make a good investment to make $1,000’s of dollars or save you $1,000’s of dollars on a home purchase. So the value for both parties is considerable!

You may have some creative ideas yourself to accomplish your objective of building good rapport and getting in with your REO Realtors’ Inner Circle.

September 12, 2017

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