*REO’s and *foreclosure flips are often some of the best buys in the San Diego real estate market. Many have been repaired and updated and are priced to sell quickly.
Unfortunately, these bargains attract hungry buyers and investors who are bidding against each other–often pushing right through the listing price–especially when rental income comes close to real or hypothetical mortgage payments.
So what tips can we offer to help insure a successful REO or foreclosure bid–and should you offer more than the list price?
1. Ask your agent to “seek guidance” from the listing agent prior to making an offer. We routinely do this, trying to avoid going blindly into a bidding situation. It doesn’t always work, but we’ve had good success doing so. There is a definite benefit to having good working relationships with other agents.
2. Have a pre-qualification letter from your lender in hand prior to making an offer. It is now standard practice in San Diego real estate to submit that pre-qual letter with all offers.
3. Offer a fast closing date with no contingencies. Sellers and lenders will not wait for you to sell your home before being able to close on another. REO lenders like speed–at least from the buyer.
4. Present a strong earnest money deposit. Sometimes the difference between a winning and losing bid is the amount of earnest money presented. How much should you offer? That depends on the price of the property and bidding strategy. Again, consult with your agent, who can help guide you.
5. DON’T get emotionally involved with an REO or foreclosure flip until you know your offer is accepted.
6. When our buyers’ offers are accepted, we ask that the listing agent put the home as “pending” in the MLS so that further traffic in the home can be minimized. These are generally vacant homes and we want to minimize the possibility of any vandalism or damage.
Finally, REO, foreclosures and short sales are not the only real estate bargains in San Diego. Most sellers with equity in the homes have become realistic in their pricing and know that they, too, must compete with the distressed sales.
The market for home buyers has never looked better with depressed prices, a possible market bottom and mortgage interest rates at record lows. It’s little wonder that we are in a competitive bidding market.
*REO is an acronym for “real estate owned”–typically by a lender.
* A foreclosure flip occurs when an investor buys a foreclosure on the proverbial court house steps and subsequently re-sells it on the open market. The investors frequently have crews who go in and rehab the home, making it as attractive as possible to prospective home buyers.