Foreclosures: Why Your REO Offer May be Rejected

There are numerous stories of buyers in the Pekin Real Estate Market making offers on REO properties and receiving rejections … one, two, three (or more) and not understanding why.

If your offer to buy REO property has been rejected, there may be a reason.

1.       The offer may be too low. Banks, like individual sellers, don’t like to be insulted by unreasonable offers and tend to reject them automatically.

2.       If you made offers on more than one property at the same time, the bank has to assume that you are not seriously interested in the particular property they represent. Again, they tend to reject these offers automatically.

Note that, in some states, the buyer can be held liable for breach of contract if he/she accepts one offer and cancels another.

3.       REO Property often requires extensive repair or reconstruction.

·         Conventional financing requires that health and safety standards be met prior to closing.

·         FHA financing requires satisfaction of its appraisal conditions prior to closing.

Banks do not want to pay for the repairs … and buyers are reluctant to repair property they don’t already own. So, if your offer included conventional or FHA financing, it may have been rejected for this reason.

4.       If your offer was “for cash” and you do not have the money in your account for immediate transmittal, your offer may have been rejected.

5.       If you made an offer just after a property became an REO, the bank may have rejected all offers thinking that better offers would be forthcoming.

6.     There is no standard offer process. Each bank has its own rules, regulations, and forms. Your offer may have been rejected because it did not conform perfectly to the bank’s standards.

Why Banks Like Cash

Basically, banks like cash. Some listings specify that the property will be sold to “cash buyers only”.  An offer at list-price (or above), payable in cash, will win over any other offer. Here’s why:

There is no appraisal contingency: If the appraisal is less than the purchase price, lenders require a greater down payment…  something the buyer may not be ready or capable of making.

There is no loan funding contingency: Even with a pre-qualified certificate, further scrutiny of the buyer’s credit history may result in a denial of credit.

The closing process is shorter: Closing can take place within 3-7 days as opposed to 30-45 days required when the buyer is obtaining a financing.

Summary

Making and handling money is a banker’s specialty. When a bank owns property, the bank is in the driver’s seat and has the power to make its own rules and regulations.

Banks are normally large institutions that do not consider individual merit or personal circumstance when making decisions.

The fact that your offer was rejected is not a personal reflection upon your character.

Next time:

·         Read and follow every detail in the bank’s requirements,

·         Arrange your finances to offer a cash payment,

·         Remove all contingencies on the purchase,

·         Be flexible on closing dates, and

·         Accept that you may have to assume responsibility for the repair work.

Eventually, you will find a property and a bank will find you!

 For more information about buying foreclosures in the Pekin Real Estate market, visit us at www.free4clsoedlist.com or www.livinginpekin.com.