Real Estate… Answered

For most beginners, making offers on foreclosures is a miserable experience. When I first started, I crashed and burned 17 times in a row. At the time, I chalked it up to bad luck, but now that I’m older and wiser, I realize that I didn’t know what I was doing.

Now my acceptance ratio is about 1/4 and steadily improving. So far this year, I’m 2/2. The key is understanding how to negotiate with banks. Kind of like learning to dance, you need to learn a set of "moves" and then practice them every day to achieve mastery.

In this article and the one to follow, I’m going to give you six techniques that I use to dance circles around banks. Hopefully, your acceptance ratio will improve, as mine has.

Build Your Credibility

This is the most important tip I can give you. When you make an offer, the first question the loss mitigation officer asks is, "Can they close on time?" Banks hate putting a property under contract and then the whole deal falling apart. The reason is, most realtors stop trying to sell the property as soon as it’s under contract, and any other perspective buyers usually go away. If a deal falls apart, it costs the bank a lot of momentum.

So, the most important thing you can do to convince the bank to accept your offer is making them believe you can close on time, without any hiccups. You can accomplish that using several strategies:

• Offer more earnest money
• Remove contract contingencies
• Make a full cash offer
• Tell a convincing story

Warning: Do NOT apply these strategies blindly. Read my free report, Outbid This! 6 Secret Strategies for Making Irresistible Offers on Foreclosures.

Pull Comps and Show Them to the Bank

If the bank balks at your offer, pull comps to justify the purchase price. When a seller’s agent performs their BPO, they often use the highest possible comps, hoping to get the listing. You can frequently surprise the loss mitigation officer and undermine the credibility of the seller’s agent by pulling your own comps and including them with your offer. By law, the seller’s agent will have to show them to the bank.

The most powerful comps you can pull are other nearby foreclosures. Usually, they will have sold at a discount, providing you some great price per square foot estimates. The seller’s agent will usually argue that the comps are irrelevant, but you can counter argue that they are comparing apples to oranges. By using foreclosures as comps, you are comparing apples to apples. It’s not entirely true, but many loss mitigation officers find the argument compelling.

Take Pictures of the Foreclosure

Does your foreclosure look like crap? If so, then take pictures of it and send it to the bank. Most loss mitigation officers are just paper pushers; they know precious little about real estate and even less about repairs. Chances are, they’ve also never seen pictures of the property or been to see it. You can take advantage of the situation by pictures of the problems and sending them along with your offer.

Once again, the seller’s agent will probably protest, but they are forced by law to present them. Make sure you find the worst possible angle. You should also attach a description of each problem, making the repairs sound serious and expensive. In general, banks hate making repairs to properties, so showing them its problems can convince them to accept your offer.