There's a reason multiple offers on foreclosed homes are becoming so common in so many markets. Buyer demand is colliding with shrinking supplies of foreclosed (REO) homes. During the second quarter, HomeSteps®, Freddie Mac's real estate sales unit, sold nearly two homes for every one we took in.
That's good news for taxpayers (quicker sales at better prices protect the taxpayers' investment in Freddie Mac) but it reportedly has some potential buyers worried about being priced out of the REO market. Listing brokers in our national network of real estate sales agents anecdotally report more questions about how HomeSteps handles multiple offer situations and how potential buyers can improve their odds of submitting a winning offer.
Let's start with our multiple offer process. It's pretty straightforward. We require listing brokers to enter all offers received into our web-based system (HomeSteps Connect) and we set a cut-off date and time for submitting offers. After the cut-off time expires, HomeSteps evaluates the offers to determine "highest and best" according to a number of factors pertinent to the individual house being sold. Factors include the sales price being offered, concessions being requested, and the buyer's ability to close and intent to live in the house. (About two-thirds of the homes we sell are to owner-occupants.)
If an offer is received after the cut-off time, the broker enters it in the system and notes when it arrived. HomeSteps retains these offers and evaluates them if an accepted offer received before the cut off doesn’t work out. Here are a few tips for submitting an offer on a home that's affordable and meets your goals.
First, determine what you can truly afford financially based on your current income and assets. One way to do this is to meet with a HUD-approved housing counselor or get pre-approved for a mortgage by a responsible lender.
Next, do your market homework, preferably with the help of a responsible real estate agent. Identify the communities with homes that are within your price range and have the features you must have (number of bedrooms, bathrooms, distance to schools, shopping, work, etc.). Prioritize your locations and make sure your real estate agent is ready to signal you when a house that fits your budget and requirements becomes available on the market.
Third, take advantage of the Freddie Mac/HomeSteps First Look program. The First Look program gives first-time homebuyers a 20-day window to submit offers on new listings without competition from investors. Make sure your real estate agent knows if you want to submit a serious offer during the First Look period. HomeSteps homes typically sell for an average of 95 percent of market value – helpful information to consider when making an offer.
So what's the bottom line? If you expect to succeed when there are multiple offers in a competitive market for a foreclosed home, do your homework, then make sure your first offer is your highest and best offer.
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