Tuesday
03Mar2009
Top 10 Ways To Increase Your Client's Chances of Purchasing A Foreclosure For The Price and Terms They Want
in 
Marketing, Real Estate Market, Real Estate Trends Tuesday, March 3, 2009 at 12:10PM
Marketing, Real Estate Market, Real Estate Trends Tuesday, March 3, 2009 at 12:10PM 
- Get pre-approved through the bank that owns the property. Everyone thinks cash is king and in many cases it is, but I've seen banks pass up cash buyers for those who need financing and are offering a couple thousand less simply because they were willing to use their mortgage company to finance the deal. Think about how much of your money goes towards interest and how much you pay if you let it fully amortize. Find out which bank owns the property by searching the tax records and then jump online and get a quick pre-approval from that bank before submitting your offer. Make it clearly known in writing that you're 100% committed to using their lender and you might just beat out those cash investors after all.
- Don't be afraid to demand proof that the rules are being followed. If you don’t have a strong working relationship with the listing agent - request everything in writing. This includes proof of submission of your offer (with time and date), rejections, counters, and any correspondence you have with the listing side. Negotiations and transactions involving REOs can be long and drawn out so if you have written evidence of where you came from and where you're going you'll always be prepared with accurate information.
- Hone your skills and become an expert in REO. Spend the time to seek out and research the top REO buyers agents in the areas you're looking and try to learn as much as you can. Also take classes, and complete certifications that give you the tools you need to succeed as an REO buyer’s agent. If you make the commitment to gaining experience and knowledge in the REO sector buyers will seek you out, and more importantly the brokers listing these properties will get to know you and want to work with you.
- Be patient. In some areas there are more foreclosures than regular homes for sale. Be prepared to lose a house or 2, or 10, before you get one for the price you're looking to pay. This is a numbers game and the more bids you put in the more likely or one of your offers being accepted. Also, keep in mind the banks move at a glacial pace. 5+ days to respond to an offer is not uncommon. I have seen agents and buyers get frustrated and pull an offer after waiting 72 hours and the bank was actually seriously considering accepting it. You're not dealing with a person; you're dealing with a large corporation that has mountains of red tape to clear up before an answer can be given. It is your job to remain calm, cool, and collected and to keep your clients in the right frame of mind. By knowing the way things work and effectively communicating that to your clients you remove much of the confusion and frustration many buyers feel when trying to purchase REO.
- Be Prepared, NEVER go into a negotiation without a plan. Before your clients even pick up the pen to start signing the contract you should have a bottom line price firmly established, an idea of how the negotiation might go, and all the other information you have available ready to go. You should also have had the home inspected prior to making an offer on a REO because it is unlikely the bank will give you any credits if you find problems during an inspection after your offer is accepted. You’re buying “as is” so anything you can do to help your clients obtain information about the health of the property is going to help immensely as you’ll have no recourse after the closing for issues you failed to discover.
- Be Unemotional. This goes along with #5 but warrants repeating. If you decided ahead of time that your bottom line was $100,000- stand your ground. You took the time to put all that thought into your numbers so why go back on them now? Don't do something that doesn't make sense. Losing a property over a small amount can be tough but not as tough as when your clients express how much they could have used that 5% 6 months down the road when they’re trying to buy another property.
- Be Organized. Your clients are counting on you to keep the process of finding an REO efficient, convenient, and profitable. For starters, accurately label and file every piece of paper that is in any way associated with your deals. Comp sheets, tax data, anything and everything that you used to help your clients should be at the ready in case you need it at a moment’s notice. I can’t tell you how many times I meet investors who bailed on their agents because they just couldn’t stay on top of things. You’re likely going to be looking at dozens if not hundreds of properties and if you don’t keep accurate, organized files and notes you’re going to miss out on properties you’d have had the opportunity to buy if you had the information you needed ready to go.
- Get to know the big players in your area. Personal relationships go a long way in the business world and here is no exception. Think about attending local REO networking events and getting to know the movers and shakers. If people get to know you as a dedicated, knowledgeable, serious buyer’s agent they will look forward to seeing your name on the back of the offer they've just received. Having a solid reputation, as a buyer’s agent will certainly help if you and one other buyer have identical offers and the asset manager asks the listing agent, "which contract would you accept?"
- Understand the financial aspects. There were so many flippers out there who produced beautiful rehabs that added real value to the communities but they were blindsided by loan terms they weren't even aware of including 10% early payment fees, balloon payments, or worse. Knowing how to rehab a kitchen for $50,000 on a $25,000 budget is a great skill but if you don't understand the basics of lending and the financing of real estate you're just asking to be taken advantage of. Buy a few books and familiarize yourself with the terms and basic concepts of lending and work closely with an experienced lender to make sure all the details are crystal clear to everyone. This goes back to #2 as well. If your client’s bank told you 5.2%, get that in writing along with all other correspondence. Take the time to understand a crucial aspect of the business and you'll increase your comfort level and minimize your risk even further.
- Be a long-term thinker. Too many people thought only 6 months ahead when buying foreclosures over the past 5 or so years and that's where a lot of the problems originated. Examine historical trends in the area not just data from the last year. Get a good feel for where the area has been, where it is, and where it's going. If your clients are buying the home to live in then don't just purchase because it's the cheapest deal you could find. Hold off for a home that is going to do well over time and be a place you actually enjoy living. If you're purchasing with the intent of reselling then understand you might not get top dollar the day you finish fixing it up. You might have to rent it out for a year or maybe 3 so plan for the long term. If you think there's even a 5% chance it won't sell in a reasonable time make sure you consider what you'll do and if you can still afford to hold the property- carrying costs often make or break a rehab project. How is the rental market there? How will you find a qualified renter? You have to think down the road and if you’re not your clients will find an agent who will. All in all, the influx of foreclosures in the Chicagoland area has provided a unique opportunity for buyers to enter the market at prices points we haven’t seen for years if not decades. If you take the time to gain knowledge and experience in this niche sector of the real estate industry you can be a part of helping to diminish the massive REO inventory out there-which helps our industry as a whole- and become a success in the process.
View Printer Friendly Version
Email Article to Friend
Reader Comments