Investors

KP Edgestone Realty specializes in REO (Real Estate Owned, also called foreclosures). REO properties can be risky for new investors, and you should understand the scope of the project you’re planning to take on. How much will repairs cost? Are there hidden (or latent) defects that you may not be aware of from a visual inspection, such as a buried oil tank. How do you determine a fair price that the seller might accept? Your KP Edgestone Realty agent will help you to answer all of these questions and make recommendations on the types of inspections you may want to consider. We have a database of contractors that could be hired to provide estimates and complete any job.

At any given time we have 10-15 properties REO listed, and more being prepared to be listed for sale. We work with various banks and lenders who acquire the properties and then list them for sale with us. We are always happy to work with investors or first-time “flippers” and we will guide you through the offer process, which can be tricky, depending on how offers are submitted.

The Offer Process
Foreclosure listings can be sold in different ways. The sellers we work with typically sell their properties through (1) direct offers, when the buyer’s agent prepares a standard New Jersey Statewide Contract of Sale and submits it for review, or (2) the property is sold via online auction, such as Auction.com, XOME.com or HUBZU.com.

1. Direct Offers

Your KP Edgestone agent can provide comparables for the principal property to determine its market value, and then prepare an offer and submit it on your behalf. If the offer is cash, you will need to provide proof of funds which can be a bank statement showing you have enough cash to cover the purchase price, or a letter from your bank stating you have enough cash in your account to cover the purchase price of the home. The letter is a good idea if you don’t want to reveal your balance to the seller, which could imply you can make a higher offer if there is a counter. If your offer will be financed (using a mortgage), first, check with your agent to be sure that this seller is accepting financed offers. In some cases, REO transactions are cash only. If they are accepting financed offers, you will need to provide a pre-approval letter from your lender stating you are pre-approved for a loan for the offer price or higher. Similar to a bank letter, you may ask your lender to customize the pre-approval letter to the exact amount of your offer, not to reveal your full buying-power.

2. Get pre-approved for a loan

First, meet with a loan officer. Sharing income and financial information will give you a price  for which you are qualified. Your KP Edgestone agent can recommend a lender to speak with, and that lender will go over your financials with you to determine your “buying-power”.

  • Get Pre-qualified
  • Obtain a pre-approval letter
  • Obtain a “Truth in Lending” letter explaining the costs of borrowing money
  • Learn about the many loans available to buyers in today’s market
  • Learn about closing costs

3. Auction Offers

Auction platforms like Auction.com, XOME.com and HUBZU.com are just a few of the websites that manage online auctions for REO and traditional sales. The seller chooses the platform and hires a real estate brokerage to put the listing into the MLS for exposure (with other agents and all across online sites like Zillow, Trulia, Realtor.com). Although this listing is on the MLS, direct offers cannot be sent to the listing agent or directly to the seller. All offers must go through the auction “portal”. The portal is the dedicated page on the auction website which will provide the bidding platform as well as all information available (property address, description, auction information including auction start and end date and the reserve indicator.

4. Who Places My Bid on the Auction site?

The buyer places the bids for the auction property, not the agent. The reason is that the buyer must enter their credit card information to create their account on the auction site. The auction company will put a hold for the earnest money deposit (EMD) amount on the buyer’s credit card at the time an offer is accepted. If this transaction does not go under contract, the hold is released and the buyer is not charged.

IMPORTANT: You must indicate that you are working with the agent who showed you the property in order for that agent to get a commission in this transaction. If you aren’t sure where to do that, speak with your agent and they will guide you on how to do it.

  • We will go through the contract with you and complete your offer
  • If negotiations are necessary, we will work to ensure that you and the seller agree on all terms
  • A seller has three options when reviewing your offer
    • Accept it (our preferred result)
    • Counter it (if the offer is decent, but a little low for the seller, they may ask you to come up to a number they are more comfortable with)
    • Reject it (if it’s too low, the seller may reject, and you’d need to come back with a new, higher offer)

5. What is a Reserve?

A reserve is an undisclosed dollar amount that the seller is willing to accept for an offer. As bids are made on the auction site, there will be an indicator that says if the reserve has been met. If it has not, it means the offers are still too low. If it says “Reserve Has Been Met” it typically means that the bank will now accept the highest qualified offer when the auction ends.

There are times when an auction ends and the reserve has not been met. When this happens, the seller may negotiate with the highest bidder(s) to see if they can come to an agreement on the price. If not, the property will get new auction dates in the next auction cycle.

IMPORTANT: Real Estate Agents do not know the reserve amount, so don’t ask. That would take the excitement out of the auction process if the buyer knows exactly what to bid. This amount is not disclosed to anyone.

6. Legal Questions?

Questions about deposits, contract or any other legal subject should be directed to a real estate attorney. Your real estate agent should not answer questions of a legal nature and should always direct you to an attorney.