HELP! Trying to make an offer on a REO Property

[Michael S.]

Hi BP,

I just looked at a REO property with a realtor. He said there was 5 offers on the property

Q1: Can/Do realtors actually lie (or exaggerate) about the offers they have? This property has been listed for 45 days (extremely long for my market) and all of a sudden the day I look at it it has 5 offers. It just doesn't seem likely.

Q2: I am trying to make an appealing offer to the bank. I want to offer to pay all closing costs. (I previously bought a short sale and the bank paid some closing costs but they made a big fuss about it). I was hoping that including all closing costs would make it more appealing to the bank and actually make it a higher all in offer. 

Here are the Numbers:

Listed: $98,000 

Assume they have a full price offer of ($98,000- (6%commission+1.5-3%misc closing costs) = $89,180-$92,120 would be the net to the bank depending on actual closing costs (it is unlikely that it will actually be 9% but...)

I was going to write up an offer for $85,000 plus all closing costs (capped at 9% of offer). so my offer would be up to $92,650 net to the bank (at best).

Q3: Is the above a stronger offer than the offer they may be getting at full asking price less closing costs?

It sounds like I am competing with some first time homebuyers. They plan on moving into the pace "as is" with out doing any work. The place doesn't even have a functional septic system and is in very rough shape (I plan on $100K in reno) so I am not sure how they are going to move in let along get financing for it. They "are going to write an offer" with a financing contingency for getting approved for a conventional loan on the place. Maybe they can get this I don't know. 

I have a few different ways of financing the place myself. The problem here is financing the large reno budget ($90-100K). I am 90% confidant I can get money for the house plus the renovation costs (from traditional bank financing and/or private money and/or HELOC on my property) but there is always the change that I cannot.

Q4: Should I put a financing contingency in my offer? I know the offer will be more appealing the less contingencies I put in it however is there a way to back out it my financing falls through? (Most likely on the renovation side)

Q5: Should I put in an inspection contingency? I inspected the property myself. I am no expert however I know what I am looking at and don't expect any surprises from a professional inspection. However, there is always the possibility of something popping up that I missed. Should I put the inspection contingency in just as protection for myself?

Thats a lot of questions! I hope someone can help. Today is supposedly decision day for the bank. I am looking forward to everyones feedback and advice. Thanks in advance.

Michael