A reader asked a question on the Mid-Week Open Thread that I thought deserved more discussion here:
I’ve been a long time reader of the blog and it has given me great support in waiting for the right house to buy. I have found an REO recently and am interested in making a Cash offer. Not sure if it could work out and I hope I can get some advices here. A couple questions:
- Do I have to have the money ready when making the offer? Or I can have some time to get the money ready? And if yes how much time I may have?
- Should I order an inspection before making the offer? And how much discount can I go with the offer? 10% off listing or assessed amount? The house seems to be in good condition although all utilities have been winterized.
- Do I need to provide proof of funds for the cash offer?
Really appreciate any input!
I don’t have personal experience with making offers like this, but here are my thoughts (which are worth exactly what you’re paying for them).
I believe that for your offer to be taken seriously by the bank selling the home, you’ll need to have the money ready when you make the offer, and submit proof of funds along with your offer. You can certainly submit an offer without it, but if someone else comes along offering the same amount plus proof of funds, your offer will lose out.
Similarly, the inspection and discount questions are also dependent on how competitive you expect demand for this specific home to be. If nobody else is making an offer, you can include time in your offer for an inspection, and throw out a number 20% off the list price, just to see if the bank will accept it. Most likely you’ll end up in a back and forth negotiation with them, during which someone else could come along and submit a better offer (which will most likely lead to Multiple Offer Sudden Death).
If you’re thinking of seriously low-balling, you’ll probably want to make your offer as strong as possible in all the other categories. Pre-inspect, have the cash ready, and offer to close in 10 days or less, and the bank might just take it. The more buffers you give yourself in the process, the less likely you’ll be to get a deal. Of course on the flip side, the less buffers you give yourself, the more likely you are to miss something important and end up with a giant money pit.