Anatomy of a Murder -- Oops, a REO Offer & Acceptance

Welcome to the often unconventional world of REO sales.... 

Although there's a lot of talk, bargaining, countering, and jabbering, in the end there are usually only two principal documents: the original offer, and the bank's signed addendum to the original offer that's completed only after all the crosstalk and e-mails, and bank's web postings have been exhausted and the bank settles on what the deal will look like for the bank. 

Archibaldwants to purchase a home that's owned by a bank (an REO), and is priced to move.  Still, Archibald thinks the price could be lower so he asks their "buyer's agent" to draw up an "Offer" that's $20,000 below the listing price.

I am the listing agent for the bank and I receive the offer and present it to my bank: ENTER THE WORLD OF REO CONTRACTING. 

The "buyer's agent" phones me a day later asking about the offer.  I tell her I haven't heard back from the bank.  She counters, but there's an expiration time to accept the offer.  I counter by asking if Archibald is already pre-approved, has proof of funds, and has a pre-approval notice from his lender?  Next, I remind the agent, politely, of course, that the REO transaction is on the bank's time! 

My contact person at the bank looks at the offer and sends me an e-mail a few days later countering the offer by adding $15,000 back to the price.  I let Archibald's agent know the bank's "verbal" response to his offer(when she sighs I suggest he has made $5,000 on the "verbal" transaction, and like most other REOs, the house is priced to be a bargain for prudent buyers shopping the REO market), but it's not enough for Archibald.

Archibald tells his agent to counter the counter by splitting the difference between the remaining $15,000, and asking that the fence be repaired, and the garage door be re-painted.  The bank chuckles and says they'll give up another $3,000, pay the closing costs, do NO REPAIRS, and Archibald must use the Title Company of the bank's choice because the bank uses Title Companies with expertise in title issues and foreclosures particular to bank-owned properties!

It's STILL looking pretty good for Archibald and the bank and (as well as we two Realtors)...and nothing since the first offer has been written in contract form, nor signed and dated.

The bank's addendum is the final document that closes the deal, and to which everyone affixes their signatures. 

Footnotes:1) Depending on the financing of the REO for the new buyer, the bank may make some repairs as a requirement of the financing (FHA and VA, for example); 2) The bank may offer to purchase a Home Warranty for the first year as well to sweeten a deal.

All in all, REOs can be a great investment and home ownership opportunity for persons.  Most agents listing REOs are generally experienced and seasoned in the REO world.  Everyone profits from a good offer!