For home buyers, it may seem to have the easier end of the deal as one would only spend the cash and get the property. In most cases, that just is not the real situation. Bank real estate owned (REO) properties are a common spot for potential new homeowners. Offers fly around even by the minute despite declining real estate market trends. However, why do REO asset managers still reject offers? The answer may lie on the different types of financing the manager looks for.
Firstly, you may lose your offer mainly because of the type of the loan you obtained. It is but natural that big financial institutions would still want to earn massive profits from their repossessed properties. They would look for offers that would present better solutions and compensation they need to recover from the losses. Below are some financing methods that have enhanced possibilities of getting the purchase deal. However these are arranged according to which ones are preferred by the asset manager.
- Paying upfront in all cash. There is no question here. When you make this offer, you would certainly beat all the others. Aside from the guaranteed instantaneous monetary gain for the financial institution, they are saved from other processes. There is no more need for appraisal. The work for the appraiser is also saved. They do not have to worry about the value being too low thus jeopardizing the loan. And logically, the escrow for this financing would be much faster. Speed is a vital factor for the managers. It is little known fact that when REO asset managers close escrow within the specified time frame, they get a bonus for closing the deal early.
- Conventional financing. It is not inevitable that most home buyers would need a loan to purchase a property. The conventional loans present benefits to the manager himself. The conventional appraisals have less paperwork and requirements. You may need to have a little more money for the down payment. Generally, this may be equal to minimum 10 percent. Through this deal, you may appear to be a stronger investor.
- Federal Housing Administration (FHA) financing when you pay the loan costs. The appraisal is one of the issues for the manager in this financing type. In addition, sometimes the REO property is not in great condition. Since the lender is already in losses upon delinquency of the previous owner, they may be reluctant in repairing the home. You may then need to shoulder the costs.
- FHA financing when the REO bank pay for the closing costs. The FHA usually requires the buyer to put down payment of 3.5 percent of the purchase price. Then the closing and loan costs would be either paid by you, the buyer, or the seller. When you do not have the money for the closing costs, the bank has to do it. This option then emerges as somewhat non-favorable for the institution.
- Veterans Administration (VA) home loans. This may be the lowest among other offers because the VA only guarantees the loan. The VA appraisal is also known to be the most rigorous. The closing costs are also a problem.
So if you are contemplating of buying a home, there are two major tips you need to consider. First is to be financially prepared. It would be for the better if you have the whole cash. But do not limit yourself in putting up a deal when you do not have the whole amount needed. You could still try the loans. And secondly is to have contingency plans whenever your offer would be rejected. Nothing beats preparedness at any time.
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