5 Tips To Get More Bank Owned Listings AcceptedBy Paul Esajian on January 27, 2020
There is a huge difference between bank owned listings and those from a traditional seller. Even though the process is essentially the same, in many respects it is very different. With bank owned listings you may only get one chance to submit your offer. If the “I’s” aren’t dotted and the “T’s” aren’t crossed it doesn’t matter what your price is the bank will move on to the next one. With traditional sellers there is some back and forth between agents but with bank owned listings things must be done by the book to the letter of the law. This doesn’t mean there aren’t some great opportunities with bank owned listings, but you had better know what you are doing. Here are five tips to help get more bank owned listings accepted.
- Use The Right Contract: A bank owned property is typically one where the lender has acquired the property through default and is trying to rid them of the asset. However, just because they don’t want the property doesn’t mean they will simply give it away. Today’s real estate market is much different than the post mortgage collapse world where lenders were often willing to take 50-60 cents on the dollar. They will take a discount, but only in the right scenario. The first item that most lenders look for is the contract. You and your real estate agent must use the contract that the lender provides. Submitting an offer on the contract you use for every other deal doesn’t work on bank owned properties. There is too much competition and too much red tape for the lender to even look at an offer with an old, incorrect or outdated contract. Finding the right contract for the lender sounds easy enough but many novice investors fail this first important step.
- Significant EMD: With banked owned properties it is important to make your offer stand out from the crowd. Almost every offer that comes in is from an investor trying to get the best possible deal. Lenders know this, but they also don’t want to be burned if the deal falls through. One way to separate your offer is to increase your earnest money deposit. At a minimum you should have at least $500-1,000 listed on the contract. This shows that you are willing to put some skin in the game and that you really want the property. This money will only be forfeited in the event that you back out of the deal after acceptance. The reality is that on most bank owned properties you know what you are walking into, reducing your risk. You understand that you may need to gut the property, or at a minimum do plenty of updating. Unless there is something funky with the title or with zoning, there isn’t much that would give you pause to back out. The EMD you submit is worth risking for ownership of the property.
- Avoid Contingencies: Lenders balance squeezing as much as they can out of the property while still taking the path of least resistance. If you are making an offer on a property you need to understand that 99 times out of 100 they will not negotiate. They occasionally may come down on their price if you supply comps and a cost of repairs. They will not waiver from the fact that they will sell the property as-is, without any other contingencies. By asking for items to be removed, repaired or replaced you do your offer a disservice. They will typically pass your offer to the side and move on to the next one, often without making a counter offer. You need to make it as easy as possible for the lender to accept your offer and close without having to jump through hoops. The more contingencies the more complicated the offer, and the more likely yours will be rejected.
- Proof Of Funds: No seller wants to waste their time with a buyer who isn’t serious. With every offer you submit it is essential to include a proof of funds letter. The proof of funds could be in the form of a current bank statement or a letter from an attorney or escrow holder stating how much they are holding. The letter should be updated with any dates current and show you have all the funds to close in one place. You should avoid stock or dividend statements that reflect the funds may need to be liquidated. By showing you are financially ready, willing and able to close the lender knows you are serious and can act quickly. They will almost universally accept cash offers over lender financed ones, even with a small discount.
- Quick Closing: It is important to recognize that every day the lender owns the property costs them money. They have to cover a number of carrying costs including taxes, insurance and utilities. If the property is being sold in the winter they will be forced to pay to winterize the property. They want to close asap. An extended closing date may work for you, but it doesn’t always work for the lender. Any closing past 30 days is pushing your luck. Many deals are lost because buyers want to use funds from current holdings and try for 60 day closings. The longer the closing the more potential issues that can arise and the more risk for the lender. On the flip side the shorter the closing window the more likely they will want to wrap it up and get rid of the property.
There are still many bank owned listings in almost every market. How you submit your offers makes just as much difference as the price. Find a real estate agent that works closely with lenders and knows exactly what they are doing. Getting just one more offer accepted annually can make a big difference on your business bottom line.