Buying Bank Owned Property – The Offer

Buying bank owned property is a combination of an art and a science. There are a few ways to go about buying bank owned property, and today we are going to look at the best way to structure the offer and get the property under contract.

Getting a piece of bank owned property under contract for the right price is one of the fundamentals of flipping homes for profit. Getting an offer accepted is often times the first major hurdle investors face. From our experience, once you have a bank owned property under contract, the bank or asset manager becomes much more flexible in working with you to close the deal.

There are two basic offers you can make when buying bank owned property. All cash offers, and loan contingent offers. Making a loan contingent offer makes buying bank owned property on your terms more difficult than if you were to write an all cash offer.

the offerWith loan contingent offers, you will typically need to have a pre-approval letter and/or proof of funds from your lender or investor for the bank to really take your offer seriously. This can be difficult in today’s financial markets, and even with a pre-approval letter from a hard money lender, many banks will shun the loan contingent offers.

Advice that I often give clients is to write a cash offer if at all possible. Speak with your real estate agent when buying bank owned property about your options to go this route. Typically, you can show funds in your bank account, retirement account and even open credit lines to prove the funds for your all cash offer.

Being able to write an all cash offer will give your offer to the bank a sizeable advantage over other offers that may be loan contingent. Even if you choose to close the deal with a loan, the goal here is to get the property under contract. By writing an all cash offer, you can often times negotiate a lower purchase price, meaning your profit on the flip will be larger.

Some investors we work with will write these all cash offers with language to the effect that “buyer can obtain financing at no time or cost to seller” in the original offer. What this does is allow you to close with a loan without having to get a signed addendum from the bank or asset manager.

In our experience, changing an offer from cash to a loan is not terribly difficult once you have the property under contract. Sometimes it can take up to a week to get the addendum changing this signed and back to title, but you can usually negotiate for additional time if needed to wait on this and close with a loan.

If you are buying bank owned property, and have the ability to write cash offers, even if you plan on closing with a loan, that is a very good way to get these bank owned properties under contract, which is your first goal. Good luck!

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