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As an investor who has been making a lot of offers on REO’s I know the challenges that everyone is facing today getting their offers accepted. The next hurdle has become getting to the closing table. I have heard and tried a lot of different techniques lately and here are a few of my observations.

First of all, there is a lack of inventory right now in many places. For example, here in Minnesota we have a 6 month redemption period. So all those properties that didn’t get foreclosed on back in November 2008 thru March 2009 are not on the market yet. Expect a flood of REO properties hitting the market late this year or early next year.

Tip for Realtors:

While doing some research, I came across this article title “ Top 20 tips for making offers on Freddie Mac /Home Steps REO properties” and thought it was worth linking to.

Secondly, the $8,000 tax credit is due to expire on November 30, 2009. This has caused a lot of buyers who qualify for the first time home buyers tax credit to buy now.

Third thing I have noticed is that the lenders have loosened up their financing guidelines somewhat as of late, which has allowed a lot of investors who can qualify for mortgages to pick up these REO’s for long term rentals. Which is a good strategy right now if you can get the financing. Even non-owner occupied interest rates are relatively low right now which has allowed for good cash flows from rental properties that were picked up as REO’s.

So how does this help us get our offers accepted? Simple, by understanding what is going on in the market, we will be better prepared to construct offers that will get accepted.

If you are looking for REO’s for long term rental properties, make your first offer your Highest and Best offer and state that on your cover letter. Make sure to submit all addendums that the seller is requiring and include a POF (Proof of Funds) Letter and make your earnest deposit as large as possible.

If you are looking for rehab deals or wholesale deals, then I would suggest a different approach. At least until the market settles back down for REO’s. Don’t look for REO’s right now; wait till later this year or early next year. Instead, get back to the basics and start marketing for motivated sellers. Use Bandit / Street Signs and Direct Mail. You won’t get as many properties to look at and make offers on, but you will have a better chance of getting a good deal on a rehab property right now from a home owner rather than from and REO which has at least 10 multiple offers from other frustrated investors/first time home buyers who have had their first 10 full price offers rejected because they weren’t high enough.

Using this last approach will also generate a lot of other good deals. Many investors are finding properties that are not on the MLS, working a short sale with the lender and then wholesaling them to rehabbers. This has been a good approach lately, one that I think you should start looking at.



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