How to Write the Best Offer on a Bank-Owned Home in a Buyers Market

Foreclosed property, known as real estate owned or REO, is owned by a mortgage lender that has repossessed the home. It’s offered for sale under specific conditions and buyers need to do extensive homework before submitting an offer. While sales are tight and buyers scarce, most REO owners are savvy to what price the house should bring and negotiate strongly to get the highest and best price on the table. Writing a strong offer leads to REO buying success.

Be aware of the bank's acquisition price before making an offer, which includes the amount of outstanding homeowner’s association dues and any liens attached to the property's title. Don’t expect to wrap these costs up in your mortgage -- it won’t be allowed; instead, negotiate these expenses.

Submit your offer along with the most recent comparables your real estate agent has pulled -- most REO companies won’t deal with a buyer directly, but instead insist on a professional to guide the transaction. Include only REO properties in your comps and use the past six months of sales as your timeframe. Don't lowball an offer if you expect to hear back from the lender; instead submit a price that opens the door to negotiation. Expect a counteroffer as lenders have to prove to their investors that they’re fighting to achieve the best price.

Offer cash if you want the quickest response from an REO owner. Submit mortgage preapproval paperwork, along with your offer if you intend to get financing. Place a substantial deposit into escrow with your offer, agreeing to increase the deposit once the lender has approved your terms.

Ask for a quick closing date -- 30 days is normal for a cash offer, while 45 days is a comfortable time frame for a preapproved conventional mortgage. Agree to use the title and escrow company the lender suggests as they are familiar with the lender’s paperwork and methods of doing business.

Have an inspection performed on the property before writing your offer, noting what needs to be corrected to make it habitable. Consider the report your investment in the property. Don’t ask the owner to make any improvements as most REO homes are sold “as is” without a disclosure statement, as allowed by law. However, extreme remediation may be a negotiable point, especially if mold or termite infestation is found.


  • Avoid using “it’s a buyer’s market” as leverage. Lenders are savvy and may delay responding to your offer.