Posts Tagged ‘Offers’

Tips For Writing Bank Owned Offers

Tuesday, September 7th, 2010

Lee Williams offers this list of 20 tips for putting together an offer on a bank owned property.  Written from an experienced buyers agent perspective, I think certain points are right on but others come from bad experiences.   Here are a few additional comments from the Wilmoth Group perspective.  I have written about many of these before.

Communication: We will communicate with you whenever there is news or an update.  It is hard to handle every inquiry that asks “do we know anything yet?”  We prefer email because it allows us a way to work as a team effectively.  We do not get paid unless we sell and close a bank owned property so we want communication just as bad as the buyer and buyers agents.

Writing Your Offer: We suggest you write highest and best offers on the first offer because we can’t promise there will be a counter offer.  There are not a lot of counter offers from banks so all we are suggesting is take your best shot (and maybe leave just a little room if given the opportunity).

Contingency Time Periods: I would not follow William’s advise here.  In a competitive market like we have now, I am seeing deals with lengthy contingency periods not get a response.  If you need an inspection (I recommend it) make your time frame reasonable.  Banks are looking at 7-10 days and you should have an inspector who can respond promptly.

Inspections: I am not in agreement with this logic.  Either you want the ability to inspect and cancel the contract, or you are willing to complete the sale as-is.  If you want an inspection..be sure and ask for the contingency.

Offer confirmations:  We will confirm receipt and we will do it within one business day.  We will confirm in the same manner as the offer was received..fax=fax, email=email.  Yes, we prefer email.  If you do not receive a confirmation, please do follow up via email to offers@wilmothgroup.com and inquire.

Again, we do not get paid unless we sell something.  There is some great information in this post but a few points may be fact for William’s but will not be your experience with the Wilmoth Group.  In all fairness, William’s wrote this post in May 2009 so maybe his experience has changed now also.

I see the banks doing a lot to try and address these problems today.  In most cases the banks really care about the impression on cooperating buyers agents.

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Multiple Offers On Bank REO Revisited

Tuesday, May 11th, 2010

Not a week goes by that I do not engage in a spirited discussion with an agent who expects me or our company to disclose if we have offers on a property.  Combined with the unlicensed public (who are given a pass on this topic because they are not licensed and trained so I would probably ask also) we spend a huge investment of time addressing this issue.

Just a brief bit of background.  In several places on our website for Realtor FAQ (referenced on every MLS/BLC sheet) we suggest agents visit www.BuyWilmothREO.com in order to prepare to show or write an offer on one of our listings.  I would also say that this data base of questions is an excellent education source for any agent wanting to sell foreclosures listed by ANY Realtor.  Specifically..the multiple offer issue is addressed as it relates to the Realtor Code of Ethics and why multiple offers should not be disclosed unless a seller authorizes the disclosure.  For some reason, the standard of practice has denigrated to a level that, in any other type of residential sale, would have the Professional Standards committees busy with hearings.  I would guess that most bank sellers either are not aware of the violation or just have to many other things on their platters to file complaints.   Yet, I have discussed this very topic with many Asset Managers and they all agree.  Information as to how many offers exist should only be revealed in a carefully orchestrated way so as to ensure the end result is a highest and best acceptance.  

The majority of the questions I receive on the existence of offers is so that a Realtor or buyer can avoid this process of the bank orchestrating a highest and best scenario.  That is fine and a small part of me understands.  The small part is the buyer perspective.  Not a clue why a Realtor would not want to make the effort if the property might be a good opportunity for their buyer. 

Yesterday, a slightly different argument was received.  Here is the discussion I had via email with a Realtor after I informed the Realtor that the seller does not authorize our release of information on status of other offers.  

In my 6 years of selling real estate, I’ve never had an agent tell me that they can’t disclose multiple offer situations. It’s in the sellers (in this case, the bank’s) best interest to always disclose multiple offers in order to get the highest and best offer. It’s my experience that in most cases buyers NEVER offer their highest and best, thus the reason for negotiations.

My response:

Just to clarify, I did not say we would not disclose if there are multiple offers.  Different banks handle this a multiple of different ways. In the right situation, they can orchestrate to get the “highest and best” offer.  Unfortunately, with the plethora of foreclosure properties today, and the demand, it is not working in the way you expect.  Just like your buyer, many are using the fact that there are offers to not even look at the home.  Therefore, it is not at all in the sellers interest to disclose until they are ready to ask for highest and best offers.  This is the only way to keep buyers looking (after the first offer is received).
 
The other side fact is I have seen buyers walk away from even looking just because there are offers..when the offers we had were total trash.  Seems to me it is in everybody’s best interest to take a look at the property and decide if you are interested.
We also have a FAQ that describes the common Multiple Offer disclosure scenario  to help an Agent prepare their buyer.   Final note: I think buyers need to be prepared for this process.  If it gives them a bad taste, it may not be appropriate for them to be shown foreclosure properties.   There is a very high percentage in the current market that receive multiple offers before one is accepted.  It may be like looking for a needle in a hay stack to try and find one that is not affected. 

 

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Preparing To Make An Offer On a Bank Owned REO Property?

Monday, February 15th, 2010

No matter how many times I write this, there will continue to be agents who will ignore the advise given and submit their offers in a way they believe is right.  One thing I have learned in over 15 years working the REO niche is that what you think is right is irrelevant.  If you want to sell a bank owned home you follow the instructions, to a T, that are provided.  It also won’t hurt to take the following few tips and incorporate them into your way of preparing and submitting an offer. This applies to Realtors or buyers who want to submit an offer directly. 

Write Your Offer As If You Are Only Going To Get One Chance To Submit It.  Chances are, that is all you are going to get.  If there is a counter offer it will usually be made to the offer on a few terms related issues.  We find most offers are reviewed based on net to the the seller, and if it is not acceptable, the offer is ignored.

Make Sure The Proof of Funds Provided Makes it Clear that the Buyer has the Ability to Perform on their Offer.  This means if it is a cash offer provide a bank statement with bank letterhead and dated in the last 30 days.  The account holder needs to match the buyer.  If financing, the letter from the mortgage company needs to not have a bunch of contingencies.  It needs to be on a mortgage company letterhead and identify the borrower to match the buyer, the program used, the amount they will borrow and a proof that the down payment and closing costs required exist.  I hate to say this because some of my best friends are mortgage brokers and they are struggling today, but a direct lender statement is sometimes a benefit.  If it is a broker, best that they are legitimate with a history of successful business practices.

Submit The Offer In One Electronic PDF Document.  We have an email address offers@wilmothgroup.com that the offer can be submitted to..or you can fax.  Fax has issues with legibility depending on the machine used.  We are now seeing some asset managers rejecting offers because they are not legible.  If you do not have a way to scan the proof of funds and combine with the offer..find somebody who can.  This type of request is now considered a common business practice and you really need to create your own system to process in this manner.

Expect a Confirmation Within One Business Day to the Same EMail Address or Fax Where you Sent Your Offer.  Please do not send the offer and call and ask if we received it. Frankly, we don’t know until we clear out our receiving systems-something we tackle roughly every two hours.  If one business day has come and gone, and you do not have a confirmation, then email offers@wilmothgroup.com and explain that you have not received a confirmation and you have allowed one business day.  We want to know this and will research immdiately.  Please also understand that an offer submitted on Friday afternoon, Saturday or Sunday, will not be able to be submitted until Monday so you are not going to have a confirmation until Monday.

Consider How Competitive Your Offer Is.  A lot of buyers have the idea that a bank owned home can be purchased for 30-50 cents on the dollar.  This is a misunderstanding they have gained primarily by subscribing to somebody who calls themselves a guru and following their step by step plan to make millions in distressed property.  I want to be kind but it has been this way forever.  Banks do not sell foreclosed properties in the open market for these types of discounts.  Bulk packages in the millions of dollars are sold at discounts to note value that sometimes go this low.  The kind of properties we sell are priced based on a review by two brokers and one appraiser.  A price is determined by the bank based on these reports.  The values submitted by these parties take into account condition.  These properties are selling and the reason is they are priced correctly initially.

Don’t Prepare A Narrative To Submit Explaining Why The Price Offered Is The Right Price For the Bank to Accept.  How can I be kind?  Nobody will read it.  Nobody will care.  All parties on the selling side know that the windows have to be replaced and the roof is leaking.  We already took that into account when we came up with the asking price.

Be Patient and Prepared.  If you are a Realtor, please prepare your buyer for how the REO transaction proceeds.  The offer response deadline on a purchase agreement…..ignored.  It means nothing.  The deadlines are set by the seller.  You may wait a week to hear your offer is the one they wish to accept and you will have two business days to complete the execution of the banks addendum to the purchase agreement.  The bank addendum is a document that will be required to be executed by the buyer if their offer is accepted. It clears up various terms issues for the banks purposes and makes it clear the property is being sold the way the bank agrees to (as-is etc.)  So, buyers need to be prepared for not really having control over timelines….but the need to perform within them.  If not, banks today are just cancelling deals and not even letting the old buyer re-contract. 

It is a black and white business.  Not a place for those expecting room for emotion and empathy.  Prepare your buyers and your offer so that the experience can be a positive, professional one.

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Clues As To Why Your Offer Was Rejected on a Bank-Owned REO

Tuesday, January 5th, 2010

contract.jpgLets take a second to explore one of the more common questions I am receiving today…why was my offer not accepted?  I hear this from cooperative agents, and even worse, their clients who contact me.  I hate when that happens as you will see the answer often lies in what their agent did not do for them.  I do not want to go there with somebody else’s client so I have to avoid the question or send them back to their agents.

Here are a few of the more common reasons offers are not accepted:

Not Completing a Purchase Agreement Correctly-Or At All!  Not sure what happens but some agents think because these are bank owned homes, and there will be an addendum that muct be executed, that little details like financing contingencies, dates to close, and inspection requests are not important to detail in the purchase agreement.  Even worse, lets just leave every blank blank!  Tip-if it does not apply enter NA (Not Applicable) so there is no doubt what you are trying to propose.

Offer is Not Submitted Per The Instructions- Between the Realtor remarks in the mls and the info posted at www.BuyWilmothREO.com, we lay out the correct way to submit any offer.  If a proof of funds is required, and what exactly that means is available in writing for your review, but you still submit one that is from a bank account one year ago…I am sorry but you are telling us alot about the way you will execute a REO sale.  Banks don’t want to mess with people who can’t follow instructions.  They just as soon keep the home  on the market looking for somebody who can.

Be Specific in Your Offer- It is really simple..the bank is looking at a net sheet to determine the best offer.  Neither the listing agent or the bank knows what the concession is worth that just says “Seller to pay Buyer’s closing costs” or “Seller to provide an XYZ Home Warranty”.  So what?  Tell us how much is the concession in dollars, not even percentages.

Your Offer Is Presented In Such A Way That The Impression Is You Have Never Done This Before.  Lets start with emailing an offer..with each page its own jpg file of 1mb and a total email sent with 20 files at this size.  Is there anything that screams louder than this is an agent who is not ready to work with bank owned properties?  Do you think we just have somebody in our office waiting to open one attachment at a time and print and then collate?  No, we will send that offer back and guess what?  Your Hotmail account will bounce it because it will not accept a 20mb email and then you wonder why your offer was not accepted?  This is just one example. 

Here is a clue..even if this is your first bank owned property…do everything you can to make it look like you do this everyday.  It is by far the best thing you can do to give your buyer the best opportunity to purchase the home.

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Does The Bank Care About My Offer?

Tuesday, December 15th, 2009

Lately, I am hearing more people concerned that the banks are ignoring their offer.  The reason people are jumping to this conclusion is becasue they have not heard a response for the offer they submitted.  Most buyers, and their agents, are accustomed to 24 hour turnaround on offers made in the conventional home sales world.

The world of buying from a bank is different.  Of course the bank seller cares very much about your offer.  I can only compare the issues surrounding responding to your offer as similar to when you apply for a loan with a bank.  In a way, the issues are similar.  At least when a bank contemplates making a loan, they anticipate getting the money back with interest.  But, there is a risk in making the loan.  Somebody at the bank has to approve the loan which means they have assessed the risk and the probability of loss.

Selling a foreclosed property is similar in that the loss has occurred, and the bank has identified a reserve for the loss.  There has been quite a bit of analysis to determine the anticipated loss, whether it be an appraisal or a broker price opinion.  A list price was determined based on multiple parties opinion of value and the anticipated loss identified.

When I hear from an agent, or a buyer, asking me what is wrong with the bank and why they are not responding back on their offer, I typically ask how much discount to list was the offer?  It really is pretty simple, a low ball offer will take a higer level of authority to determine if a counter offer should be made or how specifically to respond.  Banks do not make loans in 24 hours typically.  They do not acknowledge changes in their anticipated losses by gladly accepting offers that defy all of their information.  Somebody has to review the situation and determine what should happen next.

They are not ignoring you.  They really are glad you made the offer.  If for no other reason but to provide some additional market information.  Just please do not call our staff daily wondering if we have a response or if the bank cares!  They get paid when a house sells so they will track you down as soon as we have a response.  I promise!

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Top Ten Items To Consider When Making An Offer On a REO Property

Tuesday, July 14th, 2009

Property_5166_1020_reg.jpgIn David Letterman fashion..here are my Top Ten Items to Consider When putting together an offer on a REO property.

10. Cash or Financed?  Cash will almost always rule for one of these properties unless the purchaser is considered to be offering “dirty” money.  Dirty money means (for those of you new to this game) that it probably was not obtained using legal methods.

9. Contingencies?  Forget about it.  You write a bunch of contingencies into your offer and you might as well start looking for something in the traditional market. The only common contingencies that do get accepted, when no better offers are available, involve successfully completing financing or an inspection within a very limited time line.

8. While we are on contingencies….lets look at Inspection Days.  Don’t expect a bank to give you any more than 5 calendar days. 

7. Per Diems: Don’t let your agent tell you these do not get enforced.  They DO get enforce and many an unhappy buyer has incurred an extra $750 in per diem charges because nobody on his team realized that banks do enforce these penalties for not closing on the contract date.  Typically these charges may run as high as $150/day.  If your agent tells you to not worry about these, I would tell the agent to not worry about you as a client anymore either.

6. Home Warranties: Unless the bank has a program where they are offering one to a buyer, don’t clutter up your deal by requesting one.  If you want a home warranty, pay for it yourself outside of the deal.  By the way-ask your agent to rebate part of their fee for the warranty if they sell it directly to you!

5. If a property goes to Auction..it may not be the best deal anymore.  I will probably get my hands smacked on this one but you really may lose the opportunity to buy the property as inexpensively once an auction starts.  Beware the auction company premiums…sometimes you will pay an extra 5% straight to the auctioneer. 

4. Earnest Money is negotiable but if you are serious about securing a property, don’t spend a lot of energy bucking what the bank is telling you they need to have.  Remember, they have something you want and this is a term they expect to set.  Often, cash offers require a 10% escrow.  Plan for $1000 on most properties.  Sometimes properties under $50,000 can be secured for $500, but I would not plan for that.

3. Closing dates need to be sooner than later.  The best idea is to set the date as 30 days from contract acceptance.  Don’t worry, if the bank needs more time… they will get it.  If you need more time, please refer back to #7 on per diems.  Why push the closing date and run this risk?

2. Look at how long a property has been on the market (Days on Market).  If it has been listed in the last 30 days, you are not going to get a big discount so if that is what you want, don’t waste a lot of people’s time on an offer.  It won’t happen..no matter how much factual documentation you have that the property is over priced.  The opportunity to potentially buy at a significant discount to list comes when an REO is aged.  By that I mean over 90 days on the market.

1. Finally..drum roll please…AS-IS means AS-IS!  It is really very simple.  Bank properties are sold as-is.  Your offer should provide you time for whatever inspection is needed.  But be warned..due to the high number of offers being made by investors who have never stepped into the home, and who then plan to inspect it and cancel the contract within the inspection period, the game is changing.  These folks have caused the banks to stop being willing to even allow inspection contingencies…forcing you to figure out if you wish to make an offer by actually inspecting the home.  Imagine that?

AS-IS means AS-IS!  I think someday I will create a Bank Asset Manager doll that you pull a cord and this is what they say! 

 

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