Many investors want to buy foreclosed homes or Real Estate Owned properties. It has been found out that many of these REO properties are under priced. Under comparable sales, banks price foreclosed properties. In its response, multiple offers are placed. This means that there are multiple buyers of that property. Therefore, stiff competition will be there when you go to purchase a bank-owned home or property.
Let us take an example to show how competitive this market is. Let us take the example of the place called Sacramento in the United States of America. REO foreclose in this place will receive anything around 15 to 20 offers.
In some cases it has been found out that banks go for ‘Highest and Final” offer, where selected buyers are asked to resubmit their offers through this ‘Highest and Final’ offer. In many cases, the banks accept that offer which is the best at the very inception.
In this article AMERACO Investors Network Program provides information as well as tips on making the right REO offer (including correct price as well as terms). What are they? Learn more from the article given below:
1. Learn about the history of the Foreclosed Home
The first thing you should do is ask agent of the buyer to get the purchase price on the Sheriff’s Deed or Trustee’s Deed. In general, this is noted on the document itself. You can get this from a title company or the tax rolls. After getting this, you can compare the bank’s asked price with that of the bank’s purchase price.
Now, check the loan amount that was once secured to the foreclosed home. A bank will accept a price which is between the foreclosure sale price and original mortgage balance, in case the property is underpriced.
2. Determination of the Comparable Sales for the Foreclosed Property is a Must
It has been found out that list price has miniscule effect on the home value. The most important one in here is the market value. In case, there are other competing offers against yours, it is evident that other purchasers will offer a price that is more than that of the list price. Here, are three tips provided by AMERACO Investor Network:
i. The first thing one can do is to find out the real worth of the REO property. To do this, you can check the comparable sales of that neighborhood for the last three months. This process is also known as Comparative Market Analysis (CMA). Only those REO homes should be chosen that have similar number of bedrooms, square footage, amenities, baths, and condition.
ii. Search for the pending sales. Once you find them, ask your agent to find out the agents of those pending sales. Inquire about the accepted offer price of those properties. Please keep in mind that some of them will share the information with you but others will not.
iii. Check out the active listings. To formulate the price, other buyers will most probably use this listing. This is because these are the properties that the buyers actually tour.
These are some of the important…