What is the process of buying REO'S from the bank?
Just about all banks are requiring you to go through Realtors to submit offers these days. They do not have the time or resources to service millions of requests to sell direct to consumers. Check the banks websites for lists of foreclosed properties and contact information. All Realtors should be able to provide you with lists of homes in foreclose or bank owned.
The process works like this in California. First, you must be pre-qualified or approved on your loan in advance of writing an offer. You will need to submit proof of funds to show you have the money to buy the property. Banks will require a good faith deposit to hold the property in your name. This is typically 1-3% of the purchase price in California. Other states could vary drastically in this amount so be sure to check with realtors or lenders in your state.
All banks will require you sign bank addendums as a part of your purchase offer. These generally limit your rights as a purchaser so read them carefully. Your offer will be uploaded to a computer program by the agent once all required documentation has been submitted by your realtor. This information is emailed to the bank for consideration. The offer that nets the bank the most money with the least amount of risk is chosen.
Banks generally prefer offers with high down payments and low risk of rejection. they do not want to make repairs to the property. Cash offers are good, followed by conventional offers with 20% or more down payments. Next a bank would consider an FHA loan with 3.5% down and lastly they will consider a VA loan if no othe roffers exist.
Most banks will take the offer that nets them the most amount of money - BUT NOT ALWAYS. For instance if the property is priced at $200,000 and the bank gets a cash offer of $125,000, a conventional offer of $190,000 with 20% down payment and no request for closing costs or repairs and a third offer of $205,000 with 3.5% down, FHA financing and a request for $5,000 help with closing costs, they would likely take offer #2, the conventional loan. The first offer gives them the least risk. The 2nd offer gives them some security and the FHA loan offers them the most net return but with a higher risk factor. In each case the bank will likely submit counter offers to all applicants asking them to submit their highest and best offers.
This scenario applies to Southern California situations and other states could vary in how properties are handled. Each bank has different policies and requirements. Chase requires buyers to write offers on their own contracts. Most other banks want the state edition of the real estate forms.
Good luck with your hunt!