There are a lot of REO sales out there.  REO is a term of art for “real estate owned.”  This means that homeowner defaulted on his/her loan so a bank has foreclosed on the property.  The Seller of the Property is a financial institution sometimes referred to as bank owned.  The Seller has never occupied the Property.  

When your buyer is purchasing an REO, help them in making informed decisions by following this simple memo.

Seller is Bank:  Remember the Seller is not a normal seller, but a financial institution, the information that the Seller requires may be unique before it considers your offer acceptable.  Many times, offers that do not include specific information are rejected, and it is frustrating to you and buyer.  So here are some tips.

The MLS:  Include a copy of the signed MLS. 

Your Buyer’s Pre-Approval:  Include a copy of your Buyers Pre-Approval on your Lender’s letterhead.  The pre-approval letter should have your Lender’s contact information so that the Seller’s Agent can verify the Buyer’s loan application and current status.  Some sellers request that the Buyer be pre-qualified by a specific Lender at no cost or obligation.  This is not to say your buyer will be required to use that lender, only to make application.  This is not a violation of RESPA, so do not waste too much energy dealing with this, just have your buyer apply.

Loan Application:  Start your loan application as soon as you can.  You really should have already started prior to submitting your offer.  Any offer must have the above-described Buyer Approval Letter from the Buyer’s Lender.  Lenders are familiar with third party contracts and should begin processing the loan without the signature of the Seller.  The Seller may also have financing available, which may come with financial incentives..  Check with the listing agent as to the availability of loans.

Buyer Deposit:  Include Proof of Funds and verification of those funds from a copy of bank statement of your Buyer, etc., earnest money aside, this is the ‘true down payment.’

No Large Contingencies:  Refrain from making your offers contingent upon the sale of your buyer’s existing home. Typically this will not be accepted.

Seller Real Property Disclosure Form:           The Seller will not sign, and the Buyer waives their right to, a Seller’s Real Property Disclosure form (“SRPD”).  The Buyer agrees that within 7 days of the mutual acceptance of this Purchase Agreement to provide the Seller with the Buyer’s written waiver of their rights per NRS 113.150, and the waiver shall be notarized by Buyer.

Multiple Offer Scenarios.  Get ready to be in a multiple counter offer scenario.  Remember that a seller is under no obligation to negotiate offers in the order in which they are received.  Remember even if your buyer accepts the counter, the parties are not in contract until the Seller “reconfirms” the acceptance.

As Is:  Be aware that the property is going to be sold in an “As Is” condition.  You should negotiate any proposed repairs upfront, because if a defect is discovered, the seller is not likely to be concerned in making any repairs.

Home Inspections:  The Buyer can make an inspection, of many kinds, to explore the condition of the property, but investigate if the utilities (and which ones) are on to allow for inspections.

Extensions:  Do not expect easy extensions.  We may be in a buyers market, but these sellers are a different animal and time is of essence.  Expect to pay per diem for extensions.

NRS 116 CIC Certificate of Resales:  Although required by law to be provided by the seller, don’t expect a delivery.  Get over the complication of this and work with your buyer to get the package ordered and paid for by the buyer as soon as you can.

 For more information . . . check out My Blog of Nov 9, 2007 on this topic.