I’ve talked to hundreds of Realtors and REO specialists about contract offers and the biggest complaint I hear is (and pardon the French) “…the offer sucks!” The price is in line but the bidder did not follow the bank’s requirements to submit a bid. Too many investors and Realtors think it’s ok to skip a few unimportant steps when submitting an offer, as long as they name a good price.

When you fail to submit all the required documentation with your offer, the lender is probably going to put it in the dead pile. They don’t care what’s missing, they just care that anything missing means more time and effort on their end. The Realtor is required to present all offers but the seller is not required to look at all offers. So, unless every required item is included your deal is dead on arrival.

You lost another deal. Why? Your offer did not solve the Bank’s problem..

Let’s look at this from the banker’s point of view. More than likely they are handling properties from a few counties to all over the place in a small state. That must be taken into consideration: they may have 100’s of properties to manage and 50 different realtors calling on deals and problems with the properties.

This is why your offer must address the bank’s problem as well. If you submit a half-baked offer or an incomplete offer the lender doesn’t have the time to deal with it. Period. The bank representative has to deal with the realtors and with his/her supervisor as to why these properties are not yet under contract. S/he is being pulled from both ends and they feel the pressure. It’s your job to solve that problem. Every month the representative has reports showing how many loans they have closed. This may translate to a bonus. Is your offer going to add to that for the month or quarter? If not, you lose.

You bid over the asking price and still lost? Read your own offer. Would you accept it????

I’m dead serious about this one. Look at your own offer from the lender’s perspective. Would you accept it? My close friends in the business tell me stories about offers that make them laugh until their sides hurt. Here is a list of the biggest ones. Remember, you’re buying a foreclosed home from a bank.

·       My wife is not home now she will sign it later

·       I can’t close for 120 days

·       I have to sell my other house first

·       Well just loan me the money since you already own the house

·       Offer contingent on wife’s approval ( bet this made the wall of idiots)

·       Will you loan me the money to fix it since I am doing you a favor and buying this house?

And the list goes on but you get the idea:

Not all deals for Foreclosed properties revolve around the offer price. Your contract may be the problem.

Let’s take some time to look at the offer. First, read all the requirements from the lender. You can offer full price but if you haven’t submitted all the required documentation you’re not going to get taken seriously.

A lot of banks require you to get approved with one of their accepted lenders first. You’re not required to close with that lender, but the bank wants to make sure you can get the loan. I have been told if their lenders say you’re not approved…. Next! (See, your price was not the issue)

I’m surprised at how many people fail to supply proof of funds. The money must be liquid or you must be able to get it in a few days.

A big problem is a buyer who says he is buying the home cash, but is actually financing it. This is not a good idea because you lose the mortgage contingency in the offer and you may lose your earnest money. (OUCH)

Two of the bank’s biggest concerns in an offer are the right to inspect and the closing date. So let’s take each one by itself.

Right to inspect. Some Realtors have told me their buyers wanted 30 days to inspect because the house was a mess and they wanted to make sure of the rehab cost. This is all well and good but if your contractor needs 30 days to figure out a bid, get another contractor.  No bank or seller should ever have to keep a property off the market that long while you do your due diligence.

Closing date is a big issue for the banks. Remember, they answer to Wall Street (and now the Federal Government) and the faster they can get a non performing asset off the books the better (Remember they have a problem and you’re there to fix it) So know when they report to the SEC and Wall Street. This is easy: Google it. I personally think your realtor should do this but I wouldn’t hold my breath. Be ready to close when you make your offer.

I’ve presented some very compelling ideas on making offers and getting your bids accepted. But you must also do your homework before you present an offer.

When I am looking for a home I go through the following steps every time. It’s like the pre-flight checklist- nothing is omitted.

·       Is the contractor available for the whole day and ready to give me bids on the spot? (Don’t buy the “I need time to check the prices” excuse. Both of you should know the cost of carpet and light fixtures, appliances, etc) They and you should have a rough estimate of the electrical costs and A/C

·       Have the funds in place and liquid so all you have to do is wire transfer funds to the closing attorney

·       Know the comps in the area on foreclosed and rehabbed homes. Bring your laptop so you can get on the web right there and figure out the issue

·       Have the MLS sheets, owner information and due diligence on the bank done before you go out. The bank information will make a difference in your offer

·       And be prepared to buy a house if it fits into your buying program.

Good luck!

 Paul

Paul J Da Costa

Is a licensed Realtor in Georgia. He is a Real Estate investor, educator, and national speaker.

Paul is available for select speaking engagements and can be reached at 941-716-2597

www.pauljdacosta.com

paul@pauljdacosta.com