Buying a Foreclosure-REO
by Alex Baglioni, Certified REO Specialist.
Get our FREE weekly REO Hotlist, with all the foreclosures for sale in Broward County. Simply click on the link!
Some fact about foreclosures. In Broward County and for 2011, there were 13,959 sold single family homes out of
which, 3,881 were foreclosures (see proof). 2,340 were sold cash (see proof), 646 with conventional loans, 752 were
sold with FHA (see proof), and only 332 (see proof) paid some closing costs. There were only 51 closed sales with VA
(see proof). See "What offer will win the house" below.
FHA and VA does not allow leaky roofs, properties without kitchens, without a/c's, mold, and properties in with general
disrepair. Because of this reason, almost 80% of all foreclosures would be sold to cash, and conventional loans.
Typical Terms:
If you are thinking about buying a foreclosure, you should know that each bank/lender works a little differently, but they
all have similar terms. When thinking about buying a foreclosure, these are typical terms you should expect:
Please read this brochure that explains how offers are considered, and although not all banks are the same, this is a
normal bank checklist that we must follow before making an offer (requested by the bank/listing agent).
If you do not agree with the above terms, you should not be looking at REO's, as they don't negotiate their terms. Get
our FREE weekly REO list, with all the foreclosures for sale in Broward County. Simply click on the link.
What offer will win the house?
When dealing with foreclosures, you don't only have to be the highest offer, you also have to be the 'best". They will
counter to you with "highest & best." We know about highest, but which offer will be the best?
Since the Bank dictate the terms, cash or the type of financing will determine which offer will be the strongest, and
most likely to close. See below and find out where you are in the food chain:
From strongest to weakest:
Statistics provided by the SouthFlorida MLS System for Broward County in 2010
60% +/- Cash contracts
17% +/- Conventional loans
11% +/- FHA--Buyer paid all of their own closing costs
8% +/- FHA--Bank paid some closing costs for the Buyer (max 3%)
1% +/- VA -- almost non-existent
3% +/- Mis-reported.
Just a thought: Terrific deals are normally 3% - 5% of all listed property. Looking at the above table,
who do you think is snatching those great deals?
QUIZ
A three acre, 7800 square feet home in SouthWest Ranches (substantially discounted) entered the market in August
2010 asking $635,000.00.
1. How much did it sold for?
2. How long was it on the market?
See the answers here. DOM stands for "Days on the market"
by Alex Baglioni, Certified REO Specialist.
Get our FREE weekly REO Hotlist, with all the foreclosures for sale in Broward County. Simply click on the link!
Some fact about foreclosures. In Broward County and for 2011, there were 13,959 sold single family homes out of
which, 3,881 were foreclosures (see proof). 2,340 were sold cash (see proof), 646 with conventional loans, 752 were
sold with FHA (see proof), and only 332 (see proof) paid some closing costs. There were only 51 closed sales with VA
(see proof). See "What offer will win the house" below.
FHA and VA does not allow leaky roofs, properties without kitchens, without a/c's, mold, and properties in with general
disrepair. Because of this reason, almost 80% of all foreclosures would be sold to cash, and conventional loans.
Typical Terms:
If you are thinking about buying a foreclosure, you should know that each bank/lender works a little differently, but they
all have similar terms. When thinking about buying a foreclosure, these are typical terms you should expect:
- Most will sell very close to full price, or higher than full price when multiple offers (the
- The average percentage for the asking price vs. sold price relationship is 99% for financed purchases, and 98%
for cash purchases. This means that out of all the foreclosure sales in the tri-county area for 2011, if the bank
was asking $150K for the house, they got $148K. Talk is cheap. See proof.
- Before making an offer in a foreclosure, you must check if there are multiple offers, and the closed sale value of
the home. The offered price should be in relationship to those two factors.
- About 60% of all foreclosures sell cash, around 20% conventional, and the rest FHA. If you need closing costs,
the most banks contribute is 3%, and this happens about 7% of the time. VA purchases are less than 1% of all
REO sales. Properties are sold to the highest and best bidder, best being cash, then conventional, then FHA.
- The maximum most Asset Managers (bank employees negotiating the sale) are authorized to go down in price is
5%. Only properties that have been in the market for a very long time, are overpriced, and have not had any
offers will be sold for less than 95% from asking. Management approval is required for this transactions
(approval may take a while).
- The best time to get a foreclosure with an FHA loan is between October and March. The rest of the year is
almost impossible to be the highest and best bidder with an FHA loan (too much competition--too many offers)
- Your offer on a foreclosure should always be your highest and best offer. The price should be the highest price
you are willing to pay for it, so if you lose the house, you do not get upset. Banks counter to the highest and
best offer ONLY. Banks don't play games during the negotiation.
- This is not going to sound good... but if the Bank tells you to jump, you jump. You have to get your ego out of
the way if you want to get a property substantially discounted in price.
- Due to condition, a substantial amount of properties are not eligible for FHA financing.
- You must be APPROVED for financing, and quite often with their own lender, before they even submit your offer
to the bank. If cash, you must submit proof of funds.
- Almost always, you have to use the Bank's closing company and escrow agent.
- You are buying as-is. What you see and what you don't see is what you get.
- Most of the time, if you are the highest and best bidder, you get an answer within one or two days. However, if
you have not heard from the bank during that time, it means that within seven to 14 days you will hear that
someone else got the property. There are no updates once the offer has been received.
- Most banks negotiate one offer at a time. When they are ready for your offer, you must give them an answer
right away, or they move on to the next offer.
- You will get "free and clear" title, unless otherwise disclosed in writing. Because of this reason, closing dates
often need to be extended to clear title issues.
- Just like with any other house, although more prevalent in foreclosures, properties may have City Code
violations. You will assume all responsibility, and they will become "your problem".
Please read this brochure that explains how offers are considered, and although not all banks are the same, this is a
normal bank checklist that we must follow before making an offer (requested by the bank/listing agent).
If you do not agree with the above terms, you should not be looking at REO's, as they don't negotiate their terms. Get
our FREE weekly REO list, with all the foreclosures for sale in Broward County. Simply click on the link.
What offer will win the house?
When dealing with foreclosures, you don't only have to be the highest offer, you also have to be the 'best". They will
counter to you with "highest & best." We know about highest, but which offer will be the best?
Since the Bank dictate the terms, cash or the type of financing will determine which offer will be the strongest, and
most likely to close. See below and find out where you are in the food chain:
From strongest to weakest:
Statistics provided by the SouthFlorida MLS System for Broward County in 2010
60% +/- Cash contracts
17% +/- Conventional loans
11% +/- FHA--Buyer paid all of their own closing costs
8% +/- FHA--Bank paid some closing costs for the Buyer (max 3%)
1% +/- VA -- almost non-existent
3% +/- Mis-reported.
Just a thought: Terrific deals are normally 3% - 5% of all listed property. Looking at the above table,
who do you think is snatching those great deals?
QUIZ
A three acre, 7800 square feet home in SouthWest Ranches (substantially discounted) entered the market in August
2010 asking $635,000.00.
1. How much did it sold for?
2. How long was it on the market?
See the answers here. DOM stands for "Days on the market"
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