Bidding War Tips? (appraisal, foreclosure, negotiations, agent)

[JonHomeHunter]

At the moment, me and my GF are looking at REOs and wanted some input on how to make our offer "better" or more appealing than the other bids (FYI, because of the price range I'm looking in, most properties have multiple bids).

First off, we're first time home buyers using FHA financing. I already know off the bat that this is already criteria that steers away some banks because of the low down payment, the potential repairs needed for the FHA appraisal, and the overall potential closing delays.

So knowing that, what are some things to spice up our offer?

- Offer slightly higher than comparables and/or the listing price? (i know sometimes this doesn't matter if a lower offer is paying in all cash)
- Offer faster closing (is this even possible with FHA financing?)
- Don't ask for closing costs?

FWIW, We're purchasing together and we both have pretty good credit

Thanks for you help!

[chet everett]

I think you need to be realistic, and frankly FHA requirements are the going make you a tougher choice for a REO -- if the place is in great shape MAYBE you could try to overbid a wee bit, but go too high and the place will not appraise out the lender is gonna know that no one using FHA is going to have big wad of dough to make the difference...

I personally think that if you are going with FHA financing you MIGHT want to think a 203K elgible home that need some fixing up. Better potential for fast jump in equity...

Good Luck!

[mar2p]

I am also trying to buy a house with FHA financing.

I have a good FICO Score of 799 average of 3 institutions. I am pre-approved for both FHA and FHA 203k financing for $300K, but I am looking for a house around $250k so that I have a $50K cushion for possible negotiations.

My lender sent me an email (I always get everything in writing!) saying that she can promise to close in 30 days, thanks to my credit. She even told my Realtor to feel free offer the 30-day closing. Even though FHA requires only 3.5% down, I plan to put at least 6%, and I offer about 2-3% EMD with my offer.

Also, speaking and making a good impression about yourselves to the listing agent might be a plus. One of the offers I have recently submitted, I happened to meet the listing agent when she had a Group Showing (like an Open House). I spoke to her about my concerns and desire of finding a perfect home like the one she listed. Of course, I complimented the house and her extensive knowledge and help. Later that day, when my agent submitted the offer for the house, the listing agent called and told my that she really liked me and want to tell the seller about me, hoping he will consider my offer (yay!). Also, I wrote a genuine, honest letter to the seller telling him that I really loved the house (true!) and thanked him for keeping it beautiful. I also wrote in the letter that I am willing to wait for his answer, and even if my offer is near my max budget, I would be happy to know if he has anything to address. Oh, and I also attached VOF that covers my EMD and down payment.

I hope my offer will be considered and accepted, but so far, listing agents made comments to my agent that they liked my offer (being accepted by the sellers were a different story, though). What I am trying to say is - pass the first obstacle - get the listing agent's attention and empathy!

Offer is just a template and look the same; make your offer more personable to get attention.

Good luck to you, and wish me luck!

[JonHomeHunter]

Thanks for your tips!

I just spoke with a friend who recently bought a new home and was in a similar situation as us. She told me that bid after bid, she was constantly getting outbid by cash offers. And she said that on the bid she got accepted on, her agent was SUPER nice and was energetic and telling them the FHA loan would go through etc etc and voila! They got it. So maybe having an enthusiastic agent helps?

Good Luck to you too!

[mar2p]

Thanks! I'm sure good and positive agents help big time! That's how I was trained to be by my employer brokerage a few years ago (I hold CA RE license, but I currently put my RE profession on hold).

You're not alone. I am in the same situation - I lost 12 bids so far since January, but my agent is very supportive and communicative. Also, having a good lender helps, too. After all, it's more like a team work of everyone involved. Let everyone on your side know your concerns and never stretch out of your ability (financially, and emotionally). Everyone will support you and will keep eyes and ears open for any possibility. When one is struck down, move on to next with a positive attitude! Also, do your studies - don't rely 100% on agents. If you see a house with questionable remodels, call the city and find out the permit status or ask your agent to send you CMA and tax records on each property you consider to offer - this way, you can move on without stepping on a land mine. Learn terms so you will be fully aware of communications Always think to defend yourself before believing (or being driven) by others! When others know you have knowledge, people will be respectful and will try to work hard for/with you.

[Whereto?]

A few Benjamins taped to the offer?

[mommygarcia]

I'm going to be very honest with you. Trying to buy an REO with an FHA loan is like going to war with a broken leg and no gun.

I always tell my buyers to put themselves in the selling-bank's shoes to understand the logic...

Bank has already wasted time with the previous owner/borrower, had to go through a foreclosure process (paying legal fees) and now has to upkeep a property until it sells. It is looking for a sale that will be a sure thing. What is a sure thing? A Cash buyer.

Why wouldn't a bank go with an FHA-buyer willing to pay more than asking price? Because your FHA-lender will probably kill the deal with the appraisal, an extra underwriting development or guideline changes.

With REO's, cash is king. Try looking for short-sales. You'll have a much better chance.

[rjrcm]

I recently worked with an FHA buyer trying for an REO. It's even harder when the price range is under $100K. Most offers are cash. We made several offers and finally got one to accept. Bid was well above asking, did not appraise but bank dropped price to match. I think we got lucky that there wasn't a cash offer competing on the one they got.

[mar2p]

Hi JonHomeHunter -
I wanted to tell (and encourage) you that my offer with an FHA for a short sale has been accepted by the seller today! I was countered yesterday, and my realtor told me that my offer was one of the lowest of all but picked as one of the 3 final ones by the seller. Seller's agent told mine if I could increase my offer price by $5k and remove consessions ($5K closing colst credit), seller would pick my offer over others'. Later the day, after the acceptance, I learned that the other 2 offers came in much higher than mine - which I wouldn't have been able to beat, and they were conventional loans with higher down payments.

The reason why the seller chose mine was the letter I wrote to them. It was a short letter that I basically stated that I really loved the house and thanked them for keeping it so beautiful. Also, I stated that they hired a great realtor who explained to me about the house and the process of short sales; hence, I was made aware of the length it may take to close, and since I love the house, I will stick around and be patient through the short sale process. I didn't make anything up - I really wanted to write the letter so that the seller would know how serious and commited I am about buying that house. In short, YES, FHA has a chance, and can even beat other offers, too! I hope this will happen to you, too! Good Luck!

[rjrcm]

Originally Posted by mar2p

Hi JonHomeHunter -
I wanted to tell (and encourage) you that my offer with an FHA for a short sale has been accepted by the seller today! ...

Hope it works out for you, but I'm surprised the seller would pick yours over a higher, conventional offer that would have a better chance at bank approval. Also, are you sure they are not submitting all offers to their lender? Some agents will submit all and others will do one at a time with others in backup position.