Pricing is too low: The number 1 error buyers do when making an offer is a low ball price.
Many buyers think when making an offer on a bank owned property that they can low ball the listing price. In most cases, banks sell at listing if not a little higher than listing price. Don’t automatically low ball a price. Have your Realtor do a market analysis and compare the comps that are nearby. Very often you will be bidding against other buyers, if the home is newly listed and is in good condition prepare for multiple offers and give it your best offer. If the home has been sitting on the market for some time- over 40 days, you may consider lowering the price. Once your offer is accepted, expect a counter offer. It may be a higher price than you expect but the banks have to demonstrate to their investors, shareholders, and auditors that they are trying to get the highest price possible. Your Realtor and you can do a counter to the counter offer. Sometimes this approval will take up to 5 days.
- Asking for repairs or inspection to be paid for: When making an offer on a bank foreclosure- never ask for repairs to be made or inspections to be paid for. Banks always want to sell a property in “as is” condition. Most will provide a Section 1 pest certification, but not unless you include it in your offer and negotiate the point. They will allow you to get all the inspections you want (at your expense), but they may not agree to do any repairs. Your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct.
- Do not have a loan pre-approval letter: Some buyers think that the bank will take their offer because they have a high FICO and will take their offer based on that. The highest percentage of buyers fall out of escrow because of some loan situation. Banks want to make sure the buyer will be able to close their loan on time. Getting a pre-approval letter means that the lender already has all the documents from the buyer, pulled credit, has picked out the loan and has done some of the underwriting already. This will speed up the loan process considerably. Have your lender state your FICO score on the loan letter along with the type of loan you are getting. You will need to show verification of funds to be used in buying your home. Make a copy of the statement where your down payment is coming from. Make sure that the funds are accessible and within the state you are buying your home. Out of state checks can take up to 3 weeks to clear.
- Long Contingency Periods: Most banks do not want to approve long contingency periods- Try shortening your contingency periods to 10-15 days. See if your lender can close within 15 days. Sometimes terms are more important to a bank than a little more money. We have seen banks take $15,000 less for a 15 day closing with a 5 day contingency period.
Make sure you work with a Realtor who has experience with distressed properties and making offers on short sales or bank foreclosures. You have the greatest chance getting your offer accepted if the Realtor knows how you make your offers more competitive. They can also tell you the risks involved buying a foreclosure as compared to a short sale or regular equity sale.