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1. Be Prepared - Have a solid lender pre-approval letter and up-to-date proof of cash funds statement ready to submit with your offer.  Lender REO Asset Managers will evaluate offers on net cash to seller and heavily factor in the likelihood the buyer can really close.

2. Be Quick to Take Action - Most distressed homes that are well-priced receive multiple offers within hours of listing on the Multiple Listing Service.  Do not delay submitting your offer or risk being left out of the window of offer acceptance.  Sign up to be the first to know about new property listings that match your buying criteria.

3. Write a Clean Offer - Lender REO Asset Managers want to sell their listed properties fast.  Contracts including lengthy inspection periods, survey or appraisal contingencies, or other 'weasel clauses' to allow the buyer to get out of the contract will usually be disgarded without a second look. Most asset managers will allow a 7-10 day inspection period for the buyer to evaluate the home and repairs.  See a sample Bank Foreclosure Contract Addendum

4. Know Property Values and Trends - Though you can get a great deal in distressed properties, not every foreclosure home will be a great deal.  If there are many other foreclosures or vacant homes near your planned purchase, be aware that the appraisal may come in lower than expected due to new appraisal requirements. Study local sales trends and recent neighborhood home sales.

5. Know What is Negotiable - Lender REO Asset Managers are not emotional when it comes to selling REO properties - it all comes down to the numbers.  However, homes with serious repair items, such as structural repair, mold, electrical and plumbing systems, that may prevent a quick sale may motivate the Lender REO Asset Managers to allow for some repair concessions, and Lender REO Asset Managers may choose to contribute to pay for the buyers' closing costs if nearby home sales show similar seller concessions.  Many savvy buyers are inspecting the home prior to writing an offer and including requested repair items in the terms of the offer, rather than asking for concessions after offer acceptance by the by seller.

6. Close On Time - When you make an offer on a home, an earnest money check is usually required to be submitted when the offer is accepted.  If you cannot close on the date promised in the contract, your earnest money deposit may be in jeopardy of being lost due to breach of contract.  In fact, some REO sellers are now including additional penalties in the terms of the contract addendum if a buyer fails to complete the sale.  Plan to close as quickly as possible, but know what is realistic for your situation and your lender's requirements to fund the purchase.

7. Work with an Experienced Realtor - Knowing what to look for in a home, where to look, and how to present an offer that is more likely to get accepted are critical skills to finding a great deal in this market.  Many times, the best deal is made through finding the most motivated of sellers, negotiating for price and terms that work for both the buyer and seller, and properly advising the buyer client to protect their interests and needs while avoiding common pitfalls. 

For more information about finding and buying Foreclosures and Government Owned homes, click here.