The Most Interest

So, you want to put an offer in on a bank owned property?  I’ve asked several people who are in the business and here’s the best data I’ve collected:

The truth is that many times an offer is not accepted because the two parties involved are not optimal for each other.  If you are selling your house, you don’t care who the buyer is – you will get paid regardless. Banks, however, do care and most brokers do their homework on a prospective buyer better than others.

Here are some things to keep in mind, especially during these times:

• Banks are very hungry for cash right now so if you are going to negotiate – you have more leverage if you’re paying cash up front
• Banks know the value of the house they are selling.  They’ve done their homework.
• Banks do not like contingencies – they are selling as is for a reason – get an inspection if you must but don’t expect them to pay for anything to be done to the house
• Close, Close, Close! If you can’t at least SAY you can do this within 30 days, your offer is much weaker than others.  It usually takes much longer for this for the bank to close, so don’t worry too much. However, be ready for day 30.

Offers are basically separated into 3 tiers, A offers, B offers and C offers.  Clearly, the bank prefers A offers.

Tier A:

• All Cash – No Contingencies – Close ASAP
•  All Cash – few contingencies such as an inspection – Close ASAP

Tier B:

• Regular financing (approx 20% or more) – No Contingencies – Close ASAP
• Regular financing (approx 20% or more) – few contingencies such as an inspection – Close ASAP

Tier C:

• Low down payiment financing (3% – 19%) – No Contingencies – Close ASAP
• Low down payiment financing (3% – 19%) – few contingencies such as an inspection – Close ASAP

More than 50% of bank owned properties are purchased by all cash paying investors.  Buyers are usually street savvy and smart.  A lot of the times your offer can get beat, even if the total dollar amount is less but the earnest money deposit amount is higher.  Earnest Money is not the same as a Down Payment – (What is the difference between Earnest Money and a Down Payment) – Do not expect to win a bid if you are still somehow getting “100% Financing”.

• Be smart
• If you are serious about a property put your money where your mouth is and impress the bank
• Make sure you know who are you giving the earnest money to.
• Never give it to the seller
• Always make sure you read your contract, specifically instructions for refunding you the money you put down. 
• Don’t release the money until your transaction is complete.

Often, you can set the escrow account holding this earnest money to automatically return to the purchaser should the transaction not be complete by a certain date.