Over the past couple of months we’ve had clients submit offers on different bank foreclosed properties (REOs) and it’s not the same as submitting an offer on a “regular” deal! What do I mean? When “newbie” buyers initially come into the marketplace, they often come in with preconceived notions about how to approach the process – especially when wanting to make an offer on a bank foreclosure.A common idea is that they can offer less than the asking price, because the bank can always “make a counter offer”. The bank just wants to “sell the property” and get it “off the books”. WRONG! Here’s how it works.

An REO property will get listed for sale, maybe at a great price. There may be multiple offers submitted. But often the lender will tell their broker that they only want to see the “highest and best” offer. That simply means there will be no counter offers – you only get one shot at the deal. Highest and best may mean more than just the highest offer. Someone may come less, but all cash! Someone who comes in with 20% down may beat out someone who comes in with 100% financing (no equity or “skin” in the game).

Now comes the scary part. How much do you offer? If you offer just the asking price (“That’s all the bank wants – right?”) you might as well even forget wasting your agent’s time in writing an offer! Needless to say, forget about even offering LESS. Let’s look at specific deals we’re familiar with:

1. Last week our clients made an offer for almost $25 grand over an asking price of about $470k – but weren’t successful. We won’t say where the property is because they’re still in the hunt.
2. 988 Carissa Court, Camarillo. This came on the market at $358,900 on a Thursday afternoon, just before our Camarillo REO “speed dating” caravan that Saturday. Leslie & I went over after work to check it out – they almost needed a cop there to direct traffic! A dozen people were in the home and another dozen outside. Multiple offers came in and it sold for $375k – still a fabulous deal because other TodayHomes (name of the development) were on the market in the low $400s.
3. 1123 Lombard Street, Oxnard. We featured this home on our Oxnard REO caravan as good value. It’s asking price was $354,900 – it sold for $405,000.
4. 5096 Laurel Park Drive, Camarillo. It came on the market at $368,885 and sold for $398,000.

What’s my point? You must know VALUE before you even consider making an offer on a bank REO. Without having first done your homework and spent “shoe leather” looking at similar homes on the market, you’ll be too timid to make a successful offer.

Only 2 emotions are at work here: fear and greed. You’re afraid of paying too much, but you’re also afraid you won’t get the deal! Greed simply means you absolutely need the best low ball offer possible. Good luck! Because there are a ton of other buyers out there that have a more realistic picture of the market place.

The bottom line – if you’re just coming into the marketplace, you may find submitting an offer on an REO a frustrating experience, but that’s okay, because now you’ve been bloodied in battle and will be ready for the next deal with both barrels loaded and cocked (hunters will understand that expression…).

Good hunting and good luck!