REOs - I'm obviously missing something?

Question

Since the beginning of June, we have made offers on three REOs ... these are also our first three REOs.

The first one, I was too late to the game {the fellow who got it already has it back on the market for 35K more than his purchase ... using the same listing pictures.  We had a "plant" go look at it, all he did was clean, replace the stove, and paint two rooms.}

After this first dance, I did extensive mining here on BP and took what lessons I could in preparation for our next opportunity ... which happened at the end of June.

The second one was a "pocket listing" ... the selling agent had already shopped it to his investor list before it was listed.   We did not know this until we had placed our offer and ended up being the bridesmaid.

Finally, just last week, we made an offer on an REO before it was even listed - my carpenter happened to be doing a job across the street and saw the agent put the lock-box on the house.   We made a clean offer, 2K over the banks asking price,  sent in 10% EMD, along with a letter of finance from our accountant.  We also confirmed with the selling agent we were the first offer submitted by almost 12 hours {it would have been more, but the agent did not take our offer to the bank until the next working day}

After deafening silence from the bank, our  window expired.  I pushed the selling agent and learned they had accepted another offer - with financing and inspection conditions - and we are sitting on the bench again.

I am only guessing the other offer must have been sufficiently greater than ours that greed overtook comfort and convenience of a sure thing.

So once again, we are in second seat ... this time, being first in the door and over ask, I was certain we would be accepted or countered.

So what did I miss?  I packaged this offer and sent in an "I'm serious" EMD.

On the next one, I'm contemplating submitting a cashiers cheque in the full amount with our offer rather than an EMD of 10%.

Steve Babiak · Answer

Was this in Canada?

Things might be different there, but in USA listing agents for REO like to collect both sides of the commission; so try using the listing agent as your buying agent for these REO listings.

Luke W. · Answer

My guess is that they just made a higher offer. Once it closes you can always go back and see what it sold for. Then maybe you can adjust accordingly? As stated above, you seem to be doing it correctly.

I just got an REO under contract, and in the contract I put "Listing agent receives all commissions." Just waived mine. The Realtor called me and told me to take it out of the contract because it doesn't away the bank at all. In my head I just laughed. Not because I think she's wrong, but because no I get half of her commission and the property. Oh well.

Hope that the next one works out for you!

Steve Babiak · Answer

Bank statements might carry more weight than a statement from an accountant.  Seeing cash in the bank somehow seems to mean more.

As to why the listing agent has some sway, keep in mind that the asset managers for REOs have formed a relationship with these listing agents over time.  The listing agent has gained some trust, so if the listing agent indicates that one offer is "better", the asset manager might just go along with that.

Roy N. · Answer

Peter  Moser
The listing agent did take our offer to the seller ... not on his way out of town on Friday, but first thing Monday morning.  The property had still not appeared on the MLS site.   I'm not faulting the listing agent in any way, I've worked with him in the past and have been satisfied with his conduct at all times.  {BTW: Steve Babiak, the listing agent did see the Letter of Finance (Proof of Funds) from our accountants}.

My issue here is understanding what I can do - short of submitting the entire offer amount with the offer - to make us more appealing to the bank(s).   In this case, I cannot understand why the would ignore a clean offer, over ask, for one with inspection and financing conditions ... unless they were another 5% over our offer.

Albert Hasson
Thanks for the encouragement.  REOs are not that common here ... having three pop-up in our area in a two month window is all but unheard.

We will continue to pursue REOs, but will try other "creative" gambits as well and re building a database of "candidate" properties in our "grid areas" to try and get to the owners before the house goes to market or foreclosure.

Albert Hasson · Answer

Not many REO's left in my market but a few years ago i probably had a 10-15 to 1 ratio of offers to acceptances.  Keep trying and best of luck

Peter M. · Answer

Steve Babiak

I understand why an agent would want both sides of the commission but how does that affect the sale? If a legitimate offer comes in isn't the agent required by law to inform the seller, in this case the bank? The bank makes the final call on which offer it will accept right? How does using a buyers agent put Roy or anyone else at a disadvantage? I know logic and convention fly out the window with REOs and short sales but it still boils down to a numbers game and a bank isn't going to take a lower offer just because the agent will make less money. What am I missing here?

Roy N. I would just say keep going and try not to get discouraged. It is frustrating at times but eventually it will pay off.

Steve Babiak · Answer

Make sure the listing agent sees your proof of funds then; that will indicate your ability to close the deal.

Sounds like you are doing things well in your approach.

Roy N. · Answer

Steve Babiak

Yes, this was in Canada.  I am also aware the banks here cap the listing agent at 4%, so we dealt with him directly specifically so he could double end the deal.

Bryan L. · Answer

Keep trying.  REO sales often have no apparent rhyme or reason to them.  And it's a numbers game.

REOs - I'm obviously missing something?

Most Popular Reply