REO Guidelines

 

Financing:

 

1.  For a cash sale, the buyer needs a bank statement showing he has

     sufficient  liquid funds in the bank at the time of the offer.  Submit                  

     this statement with the offer.

 

2.  For a financed sale, the buyer needs to submit a letter of pre-approval

     with the offer (pre-qualification is not sufficient).  The pre-approval

     needs to include:

 

     *  The name of the loan program being used

     *  A  statement that the loan is for property in its present condition

     *  If the property needs a lot of work and the loan program accommodates

         this, make sure the pre-approval letter states this.

     *  Full contact information for the loan officer

                *  email address

                *  direct or cell phone number

                *  fax number

 

3.  Inform the loan officer that he or she will be contacted to verify all the

     information.

 

4.  To protect against "flipping"  and other fraudulent loan practices the REO

     (Real Estate Owned), company may require your client's median FICO

     scores and the birth date of the buyer(s).

 

5.  Get the financing correct from the start.  If the financing program is changed

     after the contract is signed, the contract is negated.

 

The Offer:

 

1.  Pay attention to the details!  Make sure that the offer includes signatures,

     initials, and address of the buyer.  Fill in every blank on the Purchase and

     Sale Agreement.

 

2.  Every REO company has addendums that are required in order for the offer

     to be accepted.  These addendums may not be modified in any way.

 

3.  "Effective Date"  is a concept that does not exist in REO world!  Always

      use specific dates and times.  (Close by 11/01/08 instead of "close within

      30 days of the effective date").

 

4.  In general, REO companies allow no more than seven days for inspections.

 

5.  Earnest money must accompany the offer, be in certified funds, and be held

     in the trust account of the agent of the seller.

 

6.  On the Purchase and Sale Agreement, use the phrase "Owner of Record"

     for the name of the seller.  The name on the last recorded deed may or may

     not be correct in a foreclosure situation.

 

7.  You may dispense with letters describing the the buyer's needs or desires, how

     the kids will love playing the in the great back yard, how the home reminds them

     of grandma's home, etc.  To be frank, the asset manager doesn't care. 

     Remember, a transaction involving a REO property is all about the bottom line

     for the asset manage and not about emotions or sentimentality.

 

Timeline:

 

1.  Set realistic expectations for your buyers.  The timeline for a REO property

     is quite different than that of a usual transaction.

 

2.  It takes a least four business days to get a response to your buyer's offer.

     Calling the agent of the seller won't speed up this process!  The momet the

     agent of the seller has a response from the REO company, the agent will

     contact you immediately.

 

3.  The REO company will always counteroffer.  Even for a full price offer,

     your buyer will receive a counteroffer.  The buyer must sign the addendum

     in order for a response from the seller once the complete package is

     submitted.

 

4.  Adhere to dates for inspections financing, etc.  Proceed whether or not you

     have a signed contract in possession.  The agent of the seller will let you know

     when the clock starts ticking.

 

5.  In cold climates, most REO properties are winterized.  If you have a building

     inspection in the winter, give the agent of the seller at least 72 hours to have the

     property de-winterized.   If the inspection requires the presence of bottled gas,

     it is the buyer's responsibility and expense to have fuel delivered and to have an

     HVAC contractor inspect the systems.

 

Keeping the Deal Together:

 

1.  Once the asset manager agrees to a deal, he won't consider another offer.

     The typical asset manager handles from 200 to 300 properties at a time.

 

2.  Any changes to the terms of the contract will void the contract.  Avoid changing

     the buyer from on person to an LLC, adding additional buyer names, changing

     financing, or assigning the contract.

 

3.  It is extremely rare for an asset manager to renegotiate based on the results of

     a building inspection.  They will never renegotiate on items that were apparent

     at the time of the showing.  In rare cases if there is truly a surprise discovery

     they may do something.  The building inspection report and a least three quotes

     from different contractors will be needed for it to even be considered.

 

4.  Any repairs, points, or other issues requiring any kind of payment will be

     taken care of and paid for before closing.  If necessary, a credit will be given

     to the buyer on the HUD closing statement.  No money will be held in escrow.

 

5.  Early occupancy or possession of the property is never permissible.

 

6.  Some REO companies do not pay state transfer tax.  In this case, the tax

     that is usually paid by the seller will be charged to the buyer.

 

7.  The asset management company will need some lead time before closing.

     They usually have their own attorney who will need to coordinate the closing

     with the title company.  Time is needed to overnight deeds.  HUD closing

     statements, etc. for signature.  The REO company rarely sends someone with

     signature authority to the closing.

 

 

 

Copyright 2008 by The Real Estate Learning Group (R)