A question I get asked all the time is “What do I have to do to get my REO offer accepted.  Most of the time the buyer’s agent wants to know the price and terms of the other offers so that they can offer more, but in most cases that doesn’t make the offer better.

A misconception with buyers is that the highest bidder wins.  This tends to only work in auctions where the common denominators are the same: Cash offers, no contingencies, non-refundable EMDs, no inspections, and quick closes.

In most cases the “best” offer is the one which the seller has the highest degree of certainty that the buyer will close within a reasonable amount of time for a reasonable price.  Here is an example:

Listing 1 is listed for $120,000.  Agent BPO and appraisal both came in at this amount.

Seller gets three offers. Cash $110,000 15 day close.  Conventional $120,000 30 day close.  FHA $120,000 45 day close.

Many people believe that the seller will either take the cash (certainty) or the FHA (more money), but the truth is that the $120,000 convention offer will win.  The cash offer is less attractive because it nets less money, but the FHA offer will likely not appraise, and the price will just get lowered or the buyer will not have sufficient funds to close.

One thing the $120,000 FHA buyer could do to strengthen their offer would be to add language stating that the “buyer to pay difference of appraisal and purchase price at COE and purchase not subject to appraisal.  This would likely make the offer more attractive.

When making offers on REOs also keep in mind that many banks won’t pay title fees or transfer taxes, so putting these on the buyers side of the offer makes it that much stronger.

There are plenty of homes coming on the market, so hopefully the multiple offer situation will not be as much of a factor as in the past.