resnWriting an Acceptable REO Offer.pptx

resnWriting an Acceptable REO Offer.pptx

1. Writing an Acceptable REO Offer 3 Hours C.E. CE 5056002-RE (Classroom) 3 Hours Contracts Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

2. Housekeeping No phones or texting during the class. Please make sure that you sign in. Restrooms Direct attention to instructor. Refrain from distracting activities. Breaks Instructor Evaluations Attendance sign out Certificates of Completion Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

3. Course Objectives: The purpose of this course is to address the need for real estate agents to understand how to write proper REO offers. Real estate professionals who complete this course will be better able to serve their clients and customers and will be more likely to succeed in getting their REO purchase agreements accepted. To meet the educational requirements for the Nevada Real Estate Continuing Education Courses for license renewal. To provide the student with the knowledge that is necessary to best represent foreclosure buyers Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

4. Course Content This is a 3-hour course divided into three sections: What's Involved? – 10 minutes The Research – 20 minutes Nevada Law Summary on Offers – 20 minutes The Purchase Agreement – 30 minutes Clauses, Acceptance, Terms - 20 minutes The Offer Package - 20 minutes HUD Offers - 60 minutes Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

5. Materials Web site definitions, these slides Certification Requirements Real Estate School of Nevada will issue a Certificate of Completion to the student after successfully completing the Real Estate Continuing Education Course. Disclosure This information is provided for educational purposes only and is not a legal opinion. Real Estate School of Nevada does not consider items in this course to be opinions of Real Estate School of Nevada and suggests a legal attorney be consulted for professional advice. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Course Content

6. Bank Owned (REO) Properties: REO (Real Estate Owned) properties are properties owned by the mortgage company (lender, bank, mortgagor) after an unsuccessful foreclosure, trustee sale, etc. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

7. What’s involved in purchasing REO properties? Understanding the process could help buyers acquire properties at a relatively lower price.  The costs of foreclosure to lenders to sell their REO properties can add up. During the process of title transfer from the previous homeowner to the lenders, there could be cost associated with: Evictions Liens on the property Insurance Property taxes In general, since the bank representatives have obviously not lived in these properties, banks are exempt from providing many disclosures, that are normally mandatory in a regular sale.   Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

8. What’s involved in purchasing REO properties? Buyers should expect the following when purchasing REO Properties: Negotiation - Since it costs the bank more to sell their REO properties, there is very little negotiating room.  Banks will try to get the best and highest offers.  It is to their interest not to “dump” properties to the market.  Most REO properties are sold recently with multiple offers, recently.  This varies from region to region. REO properties are normally sold in its "As-Is" condition.  There are only few mandatory disclosures that the banks are required to provide.  Buyers should be prepared to do their own inspections to their satisfaction.   Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

9. Buyers must be pre-approved prior to making offers.   Some properties may not qualify for a new loan if their conditions are poor and non-livable.  (This is especially important for FHA/VA approved buyers). The agent should be able to clearly explain the REO purchasing process.   Cost of renovation should be taken into consideration. In preparation to making an offer on a REO property, buyers and the selling agent should be prepared to obtain an Offer Instruction and/or an Offer Checklist from the listing agent.  A complete offer package can reduce the review time and therefore speedup the approval/acceptance time from the bank. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. What’s involved in purchasing REO properties?

10. Research before writing! Lots of savvy home buyers want to hit the jackpot and buy that REO foreclosed home, many of which are often underpriced. When banks price REOs under the comparable sales, multiple offers are often the response. This means the buyer could be up against stiff competition for that bank-owned home. It's not unusual for some REO homes in Nevada to receive 15 or 20 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called "Highest and Final" offer. Sometimes the bank simply accepts the best offer at inception. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

11. Tips on Writing Your Offer If you're wondering how you can make your offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms: 1. Get the Property History If possible, find out the bank's purchase price on the Trustee's Deed or Sheriff's Deed. Generally, it is noted on the document itself which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking. Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

12. 2. Determine Comparable Sales In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price. The list price is considered a "Starting Bid.” Look at the last three months of comparable sales (a mini CMA) for that neighborhood to determine how much this REO is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition. Look at the pending sales. Call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information, and some will not. Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers tour. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Tips on Writing Your Offer

13. 3. Run a CMA (Comparative Market Analysis) Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings. Look up the listing agent in MLS. Run a search using that listing agent's name to find the last three to six months of that agent's listings. Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Tips on Writing Your Offer

14. 4. Ask About Number of Offers If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price. If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered. Note: In typical real estate transactions, the buyer presents the offer to the seller who either accepts, modifies, or rejects it. The person who gives the offer is the offeror; the person receiving the offer is the offeree. Unless there are unusual circumstances, the brokers or principals’ agents are not a party to the offer or purchase agreement. A counteroffer occurs when the offeree rejects the offer and proposes new, or modified, terms. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Tips on Writing Your Offer

15. An offer is the first step toward a legally binding purchase contract. Its terms will create the initial rights and responsibilities of the parties. Since the licensee will often help draft or review an offer, understanding its legal parameters is crucial. An offer need not be in writing . Though verbal offers are legal, a verbal acceptance by the seller cannot create a legally binding contract for the sale of real property. Nevada’s Statute of Frauds requires all purchase contracts for real property to be in writing. Therefore, to turn a verbal offer into an enforceable purchase agreement the contract must be in writing, state the consideration, and be signed by the seller. In Nevada, most residential purchase offers are prepared using preprinted forms. There is no state mandated purchase form for real property. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. The Legalities of Offers

16. Intent: Under general contract law, the offer must express the parties’ present intent to contract. Even if performance takes place in the future, at the time of contracting the parties must intend to be bound by their words or acts. In Nevada, all contracts are assumed to have an implied covenant of good faith. However, good faith does not mean the parties have equal or balanced responsibilities, obligations, rights or benefits. Clear Terms : When the client uses a broker, the broker is responsible for ensuring the offer is complete with clear and definite terms. Ambiguous words or contradicting terms can make the offer unenforceable or void. There must be no built-in vagueness. Examples of an offer with vague or uncertain terms would be “close of escrow to be at the end of the month”, or “seller accepts but retains the right to increase the purchase price.” In those clauses, the close of escrow date is uncertain; the purchase price can be changed at the whim of seller - both conditions defeat the requirement for clear and definite terms. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. The Legalities of Offers

17. Agreement : Both parties must agree to all the terms of the offer – there must be a “meeting of the minds.” A qualified or conditional acceptance turns the offer into a counteroffer which must, in turn, be accepted. Thus, a counteroffer is a modified rejection of the original offer and creates a new offer which must be accepted by both parties. The new offer will include those unchanged terms in the original offer if the old offer is incorporated by reference into the new one. If there are subsequent counteroffers, each must reference the previous offer/counteroffer. This ensures that those terms not in dispute are part of the final document. Delivery : The offer or counteroffer, must be promptly delivered to the offeree (seller or buyer) who will then accept, counter, or reject it. If it is rejected, the licensee is responsible for obtaining a written notice of the rejection from the client and providing that notice to the offeror within a reasonable time. Once an offer (or counteroffer) is accepted and that acceptance it delivered to the offer or, the parties have a legal contract. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. The Legalities of Offers

18. The Purchase Agreement Even with research, You will need to plan on writing your offer “blind .” It is very hard to find out if there are other offers, how many there are, what the purchase prices are and so on. REO listing agents want you to write your highest and best offer right out of the gate. An REO property is not the property to play games with. “Haggling” is not usually an option here. Follow instructions! Many listing agents have specific instructions on how to right an offer. You may see attachments (or documents) on the MLS with instructions. These instructions differ with every bank and can be VERY frustrating. Exact instructions HAVE TO be followed, or your offer can be flat out rejected. Fill out EVERY associated document and have your buyers initial EVERY page, even if there’s no specific place to do so. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

19. When drafting an offer to purchase real estate, you will include not only the price that the buyer is willing to pay, but other details of the purchase as well. This includes: How to finance the home The down payment Who pays which closing costs What inspections are performed and who pays for them Timetables Whether personal property is included in the purchase Terms of cancellation Any repairs to be performed and which professional services and vendors will be used Timing of physical possession of the property How to settle disputes should they occur Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. The Purchase Agreement

20. Buying a home is a major financial and emotional event for the buyer while it's all about numbers for the REO seller. For most buyers, it will affect finances more than any other previous purchase or investment. The bank makes plans based on the offer that affects their finances, too. However, it is more important than just money. In the time it takes to write an offer, you are helping the buyer make decisions that affect how they will live for the next few years, and for some, the rest of their lives. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. The Purchase Agreement

21. Writing the Winning Bid Legibly write the offer – or better yet, use typed or online forms. Some asset managers will toss aside handwritten offers especially if they can't be read. Ensure your offer is complete and spells out in clear, concise language, the terms and closing costs.  Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

22. Purchaser Information: The seller’s name and address should be as shown in the MLS/Tax Records. The purchaser's name should be the same as they want to take title. If they are an LLC or corporation, use that as the purchaser’s name. Name changes are considered assignments and will not be allowed. Include the purchaser’s address. Some REO's require the purchaser's phone number. Be sure all this information is filled out completely. Asset managers will not take the time from their busy schedule to call you and ask how to correctly spell purchasers names. The offer will be rejected. Real Property: Accurately copy the legal description as shown in the MLS/Tax Records. Most REO attorneys are out of town or even out of state. They rely on an accurate legal description to begin their work. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

23. Purchase Price: The bank is looking to sell the property as soon as possible for fair market value. They are not interested in looking at low offers. The bank puts a lot of effort into pricing their properties accurately. MLS data shows us that the banks will not drop their prices significantly, just because they are an REO property.  To determine a price, they have typically ordered at least two recent BPO’s (Broker Price Opinions) and an appraisal.  All the data has been thoroughly analyzed by their in-house staff of trained professionals to establish a price. Once a month, the REO agent assigned to sell the real estate must submit an MSR (Monthly Status Report) which will show up-to-date comps and market trends for further analysis.  New BPO’s are ordered every 90 days. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

24. Purchase Price (continued) : It is common that a reduction of up to 3% in the first 30 days a property is listed will be given serious consideration – just about anything else will almost be rejected.  From 30 to 90 days, after the bank has already reduced the asking list price, they still may consider a reduction from 3% to as much as 8%.  Once a home has been on the market 90 to 120 days or more , almost anything can happen.  If you offer over list price, bear in mind that the appraisal will need to substantiate that price. If you find yourself dealing with a low appraisal, you have options, so don't despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing. Banks are aware of overbidding and have new addendums that include verbiage that states that the buyer will pay cash for any additional offered amount over the appraisal figure. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

25. Financing : Include type of financing and loan amount as a % of purchase price If cash, write in cash, N/A, or “X” out that section. The bank will review offers with any kind of financing including FHA in most cases, but keep in mind that they are always looking at the big picture and the net. You do not want to submit an offer without showing the REO manager that you have the means to purchase the home. With a new loan it’s of paramount importance to submit the Loan Status Report (LSR) with your offer. If paying cash, show proof of funds Often buyers submit copies of money market account or bank statements (with the account numbers obscured) to show that they are capable of completing the purchase. Submit a preapproval letter or approval letter (not just a prequalification letter). To better the buyer's chances, and as is often required, have the buyer get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the preapproval letter from this lender, along with the letter from your own lender. Banks may not rely on other lender preapprovals but trust their own departments. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

26. Closing Costs : If asking seller to pay any closing costs, write in an exact dollar amount vs. a percentage wherever possible. This may include: Discount points Buy down points Prepaids FHA Commitment Fee Appraisal Survey Tax service fee And other closing costs Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

27. Closing Costs (continued) : In most bank addendums, they reserve the right to choose what items are to be considered closing costs. Be forewarned, although some Asset Managers have agreed to pay closing costs in the past, most will not. The more the purchaser asks for, the more likely their offer will be rejected. Many banks will pay for home warranties. It is also best to keep your offer “clean.” The less that you request, the more likely you will be writing the winning bid. They will always be looking at the bottom line. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

28. Earnest Money Deposit: Have the buyer write the Earnest Money check for at least what is requested in the MLS.  Banks usually want to see 1% for the good faith deposit. Educate your buyers – a $500.00 check won’t cut it. Ensure you have a current (not stale-dated) check if you have been writing a lot of offers and in the REO game for a while. Don’t Try to Choose your own Title Company. Choosing the escrow company who will help close the transaction is normally the buyer’s decision, but when buying a bank-owned home, buyers need to be flexible. More than likely, the bank will want to choose the title and escrow companies. They have significant amounts of title work done during the foreclosure process, so they usually want to stay with that title company. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

29. Many of the escrow and title companies that banks choose to use are not local and are usually low bidders who are overwhelmed by transactions as well. They will have a traveling notary service or local options for document signing, but don’t expect the same service you get from your favorite escrow officer. Take an active role in trying to help the title company get the contacts they need locally, like the HOA information, etc  Don't make the check out to simply the word "TITLE." Make it out to the seller's requested title company. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

30. Proration's, Fees, and Expenses: Offer to Split Fees, Expenses, Pro-rations. Real estate taxes are prorated as always. Any past due taxes and penalties are taken care of by the seller. Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. The same is true for escrow fees. Many banks negotiate discount fees for title insurance or which type of policy they will pay for. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

31. Seller's Additional Costs and Limit of Liability (a.k.a. Repairs) Purchasers are encouraged to make any and all inspections needed to evaluate the property knowing that the property is AS IS . Banks do not know nor make representations of: How old the roof is Did the basement ever leak How much the electric bill runs Although the bank has seen a basic report, several pictures, plus the appraiser’s report and pictures, none are home inspectors. Do not submit a list of repairs and upgrades the property needs with a low offer. Asset Mangers will avoid such lists and the offer may be rejected. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

32. They will generally not make any repairs. Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are serious problems found during a home inspection, try to renegotiate after your offer has been accepted. Banks are much more likely to offer concessions once your offer is being considered, especially if the repairs are required as a loan condition. Remember, the bank has limited information as to the actual condition of the property. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

33. Personal Property : Don’t ask for any personal property in your offer . Banks cannot convey personal property. This includes appliances. You can state, “All items as per the MLS.” Anything that’s in the property when it closes is a bonus! Due Diligence : If other buyers are asking for 15 days to conduct inspections, and you ask for less, you will be deemed the more serious buyer. Banks, just like traditional sellers, don’t like the “Free Look” that the Nevada contract offers buyers during the inspection period. You should have no problem completing these tasks, (home inspection, pest inspection, special inspections) within a shorter time frame. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

34.   Home Purchaser’s Inspection : Most REO’s will allow a home inspection. In a perfect world, the purchaser would conduct this inspection prior to making the offer, then wave it on the purchase contract. However, in an REO market, the property would probably sell before the inspection report could come in. If a home inspection is included, do not ask for more than 5 calendar days total to conduct it and get back to the seller in writing if the results are unsatisfactory. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

35. Well and Septic : Many times, the REO company will not pay for a septic inspection or water test. You can still ask as a part of the offer and they will counter back if they will not. If your purchaser is willing to pay for the water test and septic inspection, choose the buyer will pay option. If the purchaser decides to provide their own water test and/or septic inspection, the REO company often considers it a part of the Home Purchaser’s Inspection. It should be conducted within 5 calendar days of offer acceptance.  Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

36.  The Closing Date : Provide enough time for the lender to complete the loan. The seller will charge a per diem if the closing is delayed at no fault of the seller. 30 days from contract date is almost always acceptable. Asking for more than 45 days from the date of the contract will be countered or possibly rejected outright. If the offer is countered and a few days pass, remember to change the loan commitment and closing dates if you counter the counteroffer. Closing should be anywhere from 21‐45 days. The banks do not like to do extensions. Walk Through: Three days should be the maximum number of business days requested. Do not wait until the last minute to conduct your final walk through with the purchaser. If there is a problem, it takes time to correct it. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

37. Other Terms and Addendums: There are two fields for additional information. The first is for a list of addendums and attachments. The other is for terms. Many banks require addendums that must be included with the offer. If it is a Fannie Mae REO, include the wording that Fannie Mae requires in the additional terms paragraph. Type in any other terms that the purchaser feels a need to address. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing the Winning Bid

38. Contract Clauses Banks will not (typically) accept provisions for liquidated damages, arbitration and mediation.  Often, the buyer will initial these clauses – but the bank will not.  If the buyer’s agent does not pick up on this, then the buyer would be bound by these terms and the seller would not.  Some addendums come back after a contract has been ratified by all parties to exclude these particular clauses. Negotiated away often is that the seller will not perform any repairs – regardless of the outcome of any inspection.  The key here is to inspect prior to writing the offer and asking for adjustments in the form of an adjusted asking price.  In other words, if you would offer $200,000 for a Nevada REO home for sale but you feel as if there is $10,000 of cosmetic repairs (paint, carpet, etc.), then offer $190,000.  It is so much cleaner this way and much more likely that your offer will be considered. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

39. Required Documentation Included Make sure that all documentation required by the listing agent is included: Offer docs Copy of the deposit check Pre-approval letter Verification of Funds FICO scores, etc. Addendums Transaction cover sheets Disclosures   EVERYTHING they ask for Take time to make sure they are properly filled out, signed and initialed as required. Your offer will most likely be rejected if everything is not filled out perfectly and something they ask for is not included. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

40. Email the offer to the REO listing agent. They want offers in email format because they need to upload them to the asset manager’s websites. Make it easy for them . Put all the signed docs together, scan and email them to the REO listing agent. Use the email address they tell you to use. If you don’t have a multi-page scanner, it’s time to get one. You’ll also need a program to convert the docs into . pdf format. Scan everything at no more than 300 dpi in black and white. You have to be able to email the docs – large files will jamb the listing agent’s box and may not get there at all. Ask for Confirmation of Receipt! Include the words, “ PLEASE CONFIRM RECEIPT OF THIS OFFER” in your email with the offer docs. Don’t ever take for granted the lender is in receipt of your offer. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. “How To’s ”

41. Acceptance : Allow at least 5 business days for a response. They may reply sooner and often it takes longer. If there are multiple offers, your purchasers may be asked to sign a Multiple Offer Addendum. These tell all purchasers that there are completing offers and usually ask for the purchaser’s highest and best offer. The seller may still reject any and all offers. Contract Can Not Be Assigned Addendum Applies: If any language in the purchase contract and the addendum are in conflict, the addendum language always prevails. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. “How To’s ”

42. As Is: All Seller’s addendums will state, often taking several paragraphs to do so, that the property is being sold as is . The seller will not make repairs before or after the closing. Possession: Purchaser cannot move in prior to closing. Purchaser cannot make any repairs prior to closing. Purchaser cannot “move just a few things in” prior to closing. Please don’t ask. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. “How To’s ”

43.   Per Diem Penalty: Seller will require purchaser to pay a penalty of $______ per day if the closing is delayed due to no fault of theirs. This includes the lender not having the loan ready or the attorney not being prepared. Often this is already included in the addendum, or a blank space is provided to write it in. Anything less than $100 and the offer will likely be rejected, countered, or another offer accepted. Lender Information: Many seller’s addendums ask for the name of the lender, loan officer or contact person, address, phone and fax numbers, email address. Be sure all this information is filled out completely. Asset managers will not take the time from their busy schedule to call you or me and ask how to contact the lender. The offer will likely be rejected. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. “How To’s ”

44. Sample Offer Summary Property Address Buyer’s Agent Buyer’s Agent Contact Buyer’s Name(s) Offer Date Offer Close Date Offer Expires Offer Amount Earnest Deposit Amount Financing Amount Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Home Warranty Buyer's Costs Paid By Seller Seller Closing Costs Repairs Requested By Buyer Buyer Inspection - # Of Days Contingencies Comments Financing Type LTV Preapproved (Yes Or No)

45. Writing a Purchase Agreement on a HUD Home Who can Purchase a HUD Home? Any individual who can qualify for a loan or who can pay cash may purchase a HUD home. Purchasers must use a broker or agent who is registered with HUD to place a bid on a property. Purchasers must also have a pre-qualification letter from a lender or proof of cash funds in the amount of or greater than the property they are purchasing. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Buying a HUD Home When someone with a Federal Housing Administration (FHA) insured loan can't meet the payments, the lender forecloses on the home. FHA pays the lender what is owed and then the United States Department of Housing and Urban Development (HUD) takes ownership of the home. Then HUD sells it at market value as quickly as possible.

46. How are HUD Homes Sold? All HUD Homes are listed at their "AS-IS" fair market value. Purchasers (with the exception of special program purchasers) must obtain the services of a HUD-registered real estate agent. Agents may submit bids on HUD properties on behalf of their buyers. The bid that meets the acceptable threshold and has the highest net to HUD, receives a provisional bid acceptance subject to receipt of all required documents. Once a bid is accepted, an original Sales Contract Package must be submitted within 48 hours. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing a Purchase Agreement on a HUD Home

47. How is Fair Market Value determined? By a licensed FHA appraiser Copies of the FHA appraisal are available to the lender by request after a property is under contract. If a property is exposed to the market without any acceptable offers, then a reduction of the listed price may occur. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing a Purchase Agreement on a HUD Home

48. Does HUD make any repairs to the property? No. All HUD properties are sold in their "AS-IS" condition. There are no representations or warranties, expressed or implied, on any HUD property. HUD does not guarantee the condition of any property, FHA-insurable or not, nor whether it meets local codes or zoning requirements. Purchasers are advised that there may be code and/or zoning violations on these properties and that it is the responsibility of the purchaser to identify these violations. Buyers are very strongly encouraged to have homes inspected by a qualified home inspection company to satisfy themselves as to the condition of the property at the time of sale. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing a Purchase Agreement on a HUD Home

49. Sales Contract Package – required forms Contract documents must be received within 2 business days after the internet posting of bid results. Therefore, the Sales Contract Package should be completed with your purchaser PRIOR to placing the bid. This allows for two benefits: First, the sales contract outlines the electronic bid submission form and can be used to fill in the bid information; Second, if your bid is awarded, the package can be sent via overnight mail to be received within the deadline. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing a Purchase Agreement on a HUD Home

50. The successful bidder MUST submit a completed sales package by OVERNIGHT MAIL, which consists of the following: 1. Sales Contract – HUD form 9548 (1/99) 2. Conditions of Sale - must be signed 3. Copy of Earnest Money check 4. Forfeiture and Extension Policy 5. Broker’s Agreement to Abide by HUD’s earnest money forfeiture policy 6. Lead Based Paint Addendum - if applicable 7. Radon Gas and Mold Notice and Release Agreement 8. Owner Occupant Certification – HUD form 9548D (1/98) - if applicable 9. Pre-qualification letter or for cash sales provide verification of funds Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Writing a Purchase Agreement on a HUD Home

51. Completing the HUD Sales Contract Package Mistakes and Omissions If your contract package contains any mistakes or omissions, your bid may be cancelled, and the property placed back on the market, or the backup bidder notified. Be careful when filling out the contract and addenda and be sure it is complete and correct. 1. Sales Contract – HUD form 9548 (1/99): Line by Line Electronic Version: You may download and use the electronic version of this form so long as the “Conditions of Sale” is signed by all buyers and you do not make any copies of the PDF contract (the form used must be from the printer). To produce a form that is filled out, you would need to enter the HUD case number and your confirmation number. In that instance you would enter information only on Line 2, Line 12, and Line 13 (see particulars below). If you elect to fill in the contract manually, please follow the directions below. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

52. Completing the HUD Sales Contract Package Line 1 – Complete the purchaser’s name and address of the property including city, state, and zip code. Fill in the HUD case number in the designated box and write the confirmation number above the box. These contracts are not assignable. The purchaser whose social security number was used in the bid must appear on the contract. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

53. Line 2 – Fill in the purchaser’s name and legal form of ownership. The HUD closing agent will prepare a deed to transfer ownership according to this line. This line may not be left blank or “to be determined.” Line 3 – Enter the purchase price (the bid price) and earnest money deposit. Deposit checks must be written out to the brokerage and must be in the selling broker’s possession PRIOR to placing a bid. Earnest money deposits should be in the form of a certified check, cashier’s check, or a money order. Sales price up to $49,999 earnest money deposit = $500 Sales price $50,000 and up earnest money deposit = $1,000 Vacant Lot: ½ of the purchase price of the property. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

54. Line 4 – Financing Type: Financing Options Although HUD does not offer financing directly, some of their homes qualify for FHA insured loans. There are 3 different methods a purchaser can buy a HUD property: FHA Financing Conventional Financing (any non-FHA or VA financing) or Cash In all instances, either a pre-qualification letter from a lender or proof of cash funds is required as part of the contract package which is due 2 business days after a bid has been accepted. One of the first actions you should take with a prospective purchaser who requires financing is to have them meet with a lender to receive a pre-qualification letter. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

55. There are three types of FHA Financing: IN – Insurable – 203(b): Properties listed IN appear to qualify for FHA 203(b) financing. There should not be any repairs necessary. IE – Insurable with Escrow – 203(b) Repair Escrow Properties listed IE are eligible for FHA financing with repairs to be completed by the purchaser after the close of escrow. These repairs must be Minimum Property Standard (MPS) repairs totaling less than $5,000. MPS categories include; roof, structure, and mechanical systems (such as plumbing, electric, and heating.) A listing posted inside the property will indicate actual repair amounts. The cost for the repairs is not paid by HUD; however, the buyer may finance the repair escrow amount in their loan. The lender is responsible for inspections of the repairs and authorizing release of funds. On the purchase agreement the repair escrow amount is not deducted from the net to HUD or added to the purchase price on line 3. The repair escrow amount should only show on line 4. REPAIR ESCROW ONLY APPLIES TO FHA FINANCING – not cash or conventional transactions. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

56. UI – Uninsurable – Conventional, Cash, or 203(k) Properties listed UI generally are in need of extensive repairs and are usually purchased with cash or conventional financing. The only type of FHA financing they may qualify for is a FHA 203(k) loan. 203K FHA financing is a rehabilitation loan for owner occupants purchasing properties that have over $5,000 dollars worth of MPS repairs. Not all UI properties will qualify for FHA 203(k) financing. If your purchaser is applying for FHA Financing 1. Property listed IN: 203(b) 2. Property listed IE: 203(b) with Repair Escrow Add the repair escrow amount where the contract states: “Said Mortgage ONLY IF THE PURCHASER IS OBTAINING AN FHA 203(b) REPAIR ESCROW LOAN – do not fill in an escrow amount if the purchaser is paying cash or getting a loan not involving FHA. 3. Property listed UI: 203(k) if the property qualifies for 203(k) financing Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

57. 4. Non-FHA financing Purchaser is paying cash or applying for conventional or other financing not involving FHA. If purchaser is paying cash please circle the word cash and be sure to include in your package a verification of funds. Please leave all other mortgage information BLANK (down payment, mortgage amount, and months) Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

58. Line 5 Closing Costs can be up to 3% of the purchase price. Closing costs can be found on page 2 of the Forfeiture and Extension Agreement. Closing costs paid by HUD if closing costs are entered on the bid and sales contract: Appraisal Fee: For an FHA 203(k) loan that is necessary to determine the “after rehab” value; for a new appraisal where the appraisal expired prior to sales contract execution. Credit Report: Up to $20 Flood Certification: If property is offered with FHA insurance and is on a Flood Plain Home Inspection: Includes testing for lead-based paint, radon, mold, etc. Loan Discount Points: Up to 3% to buy down the rate, with certification from lender Loan Origination Fees: Up to 1% will be paid on Conventional/FHA loans; up to 1.5% will be paid on FHA 203(k) loans Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

59. Recording fees and Transfer Charges for Mortgage: If sufficient funds are on Line 5, fees will be paid; otherwise, these are the purchaser’s costs. Survey: If required by Lender Title Insurance Coverage for Lender: If sufficient funds are on Line 5 Title Insurance Coverage for Owner: If sufficient funds are on Line 5 Homeowner’s Warranty: $200 - $400 depending on State; Check HUD Notice H 2001-13 Prepaid and escrow items: For owner occupant purchasers only Closing costs automatically paid by HUD: Pro-ration of property taxes and any special assessments such as HOA fees, utility bills: paid by HUD automatically. Settlement or Closing Fee: HUD will pay HUD’s closing agent; if another Agent is used, this is the purchaser’s cost. Transfer Charges and Recording Fees: for the deed only, paid by HUD automatically. Condominium or HOA Transfer Fee: If applicable. Repair Escrow Fee: Where applicable Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

60. Line 6a – Selling agent commission up to 5% of the purchase price Line 6b – N/A Line 7 – Net to HUD line 3 minus lines 5 and 6 be sure your math is correct on this line Line 8 - Purchaser type: Investor or Owner Occupant. Misrepresenting a purchaser as an Owner Occupant is a SERIOUS offense that may constitute fraud and may result in an investigation of the Broker, Agent and Purchaser by the office of the Inspector General. Leave discount amount blank. (Discounts for OND/TND and Non-Profit purchasers only) Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

61. Line 9 Sales transactions shall close not later than 45 days from seller’s acceptance. Properties may close in less than 45 days, but 45 days MUST be on the contract. If closing does not occur by 45 days, then extension fees will apply. A closing date must be scheduled with the HUD-designated closing agent. HUD has appointed closing agents on a separate contract to act as their representative in the closing. HUD-designated closing agents are assigned HUD properties by county. Each property is assigned a closing agent and the property must close with the designated closing agent present. Third-party closing agents may also be used but the closing date must be scheduled with the HUD designated closing agent, and they must be present at the closing. Any additional cost for using a third-party closing agent must be paid by the purchaser. Line 10 – Back-up offers does not apply You should only send in a sales contract package if you are the accepted bidder. Contract packages received that are not from the awarded bidders will be discarded without notification. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

62. Line 11 If the property was built prior to 1978 please mark line 11 “is” attached. Always mark that other addendum “is” attached. Every contract package must also contain the other required addenda. Line 12 – HAVE PURCHASER(S) INITIAL CONTRACT HERE Double check that ALL purchasers have initialed this box before sending the contract package. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

63. * Line 13 – Purchaser information: Please be sure all information is written in the correct boxes. □ Type or print name □ SIGNATURE(S) – All purchasers’ signatures are required. Contracts that are received without the purchaser’s signature may be cancelled immediately and placed on the market □ Social Security Number or EIN/FIN for ALL purchasers □ Purchaser’s address, and phone number □ Date Contract was signed □ DO NOT have purchasers sign in the “Seller” box or the “Authorizing Signature & Date:” Box. This is to be used by the authorized HUD signing agent ONLY. □ Certification of Broker □ Broker’s Name and business address □ Broker’s EIN or SSN# □ Signature of broker – Broker (or individual given written permission to sign as the broker, such as an office manager) □ SIGNATURE STAMPS are not allowed □ Broker’s Phone Number with Area Code □ Agent’s Full Name □ Agent’s Phone Number with Area Code Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

64. 1. Conditions of Sale The Conditions of Sale page is attached to the sales contract and must be signed by all purchasers. 2. Copy of Earnest Money Deposit A copy of the money order or certified check is a required portion of the sales package. Earnest money is held by the selling broker. A copy of the deposit slip of the earnest money into the broker’s account is also acceptable. Sales price up to $49,999 earnest money deposit = $500 Sales price $50,000 and up earnest money deposit = $1,000 These amounts are not negotiable. 3. Forfeiture and Extension Policy This 3-page form is an explanation of forfeiture and refund of earnest money deposits for owner-occupants and Investors as well as acceptable closing costs and extension of closing date request guidelines. Please be sure this document is read and signed by all purchasers. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Completing the HUD Sales Contract Package

65. 4. Broker’s Agreement to Abide by HUD’s Earnest Money Forfeiture Policy This document MUST be signed by the BROKER, not the agent or an individual authorized in writing to sign on the broker’s behalf. Signature stamps are NOT ALLOWED. 5. Lead Based Paint Addendum If the property was built prior to 1978, this addendum is required. This 1-page form must be signed by all purchasers and agent or broker. 6. Radon Gas and Mold Notice and Release Agreement This agreement must be signed by all purchasers. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Completing the HUD Sales Contract Package

66. 7. Owner Occupant Certification - HUD form 9548D (1/98) required for all owner occupant purchasers must be signed by all purchasers and the broker, not the agent – stamp signatures are not acceptable. 8. Pre-Qualification Letter or Proof or Funds for Cash Sale A Letter of Commitment or a Pre-Qualification Letter - from an industry-recognized bank or mortgage underwriter. For cash sales, provide verification of cash funds. This can be a bank statement, letter from a bank, or other forms or verifications that provide evidence that cash funds will be available. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Completing the HUD Sales Contract Package

67. Contract Cancellation In the event that a contract must be cancelled, the property will be re-listed the following Friday after the cancellation has been processed. If a purchaser must cancel, regardless of the reason, then a cancellation request form must be submitted along with an explanation of the reason for cancellation. If the cancellation is due to a loan denial from a lender, then the denial letter must accompany the cancellation request. If the cancellation is based on a property condition issue, then a copy of the Home Inspection must be included with the cancellation request. The decision regarding the refund, forfeit, or 50/50 split of the earnest money deposit is based on HUD guidelines as stated in the “Forfeiture and Extension Policy.” Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

68. Important Deadlines In an effort to be fair to all purchasers, HUD has mandated time frames that must be met, or a contract may be cancelled. You are responsible for meeting each of these deadlines. Bid Submission Deadline All property listings will contain a deadline date and time. Bids are reviewed for acceptability on the following business day after the deadline of bid submission. It is possible that the day you submit a bid, the review of the bids has not been completed from the day before; therefore, it may appear that the property is available and that you have submitted a higher bid. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

69. Sales Contract Package Submission Deadline It is your responsibility to check for the accepted bid information and ensure that all the required forms are properly completed and sent by overnight mail. If a contract package is not received by the deadline, the provisional bid acceptance will be cancelled and they may proceed with a back up offer, if applicable. 1. Complete your Sales Package PRIOR to submitting a bid on the Internet. This includes obtaining a pre-qualification letter from a lender or documentation of available cash funds. 2. Be extremely careful when completing the electronic bid submission. An error made when entering the sales amounts purchaser’s Social Security number, or a company’s Federal Identification Number may result in the cancellation of a provisional bid acceptance. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

70. 3. Be sure to thoroughly explain the following policies to your purchaser: □ HUD’s “AS-IS” Policy: all HUD properties are sold strictly AS-IS. □ Disposition of the Earnest Money Deposit as stated on the first page of the Forfeiture and Extension Policy. □ Line 5 Closing Costs may only be used for certain HUD-approved items. Please review the second page of the Forfeiture and Extension Policy with your purchaser. □ Completion of a Home Inspection prior to closing to be done for the purchaser’s protection so they understand the nature and cost of any required repairs; HUD does not make any repairs to a property before or after closing □ Occupancy Prior to Closing is completely prohibited. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Purchasers may not do any work whatsoever to a property prior to the completion of settlement. Purchasers may not occupy or store any items at the property prior to closing. Occupying or working on a HUD home prior to the close will be treated as trespassing.

71. □ Be aware of all processing deadlines to avoid cancellation of a provisional bid acceptance or contract: □ Bidding Deadline Dates on each listing indicates the deadline by which time a bid must be placed in order to be considered on the bid opening date. □ Original Contract Package must be received within 2 business days after the bid is posted under “Bid Results”. Faxes are not acceptable. □ Correction Requests have specific deadlines. Be sure to respond within the time frame on any correction request to avoid cancellation. □ Closing Date as stated on your Closing Agent Instructions. This will be 45 days (unless an incentive is available) from the date the contract was signed. If a purchaser cannot close by this date, you must request an extension of time to close PRIOR to the expiration of the contract. □ Earnest Money Forfeiture if a transaction has been cancelled and the EM deposit, you have 10 days to send a check or money order for the amount of the requested deposit. □ Any other deadline as designated. □ Place the case number and property address on all material submitted by e-mail, fax, regular mail, or overnight mail. Also, have the case number and property address handy whenever you contact our representative for any type of inquiry or issue. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

72. You are now ready to take the end-of-course quiz. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

73. End-of-Course Quiz Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 1. The suggested time for due diligence on an REO offer is: A. 5 days. B. 10 days. C. 15 days. D. 30 days.

74. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 2. The amount of the earnest money deposit should be: A. $500.00. B. $1500.00. C. Whatever the buyer can afford. D. The amount requested by the seller per the MLS. End-of-Course Quiz

75. End-of-Course Quiz Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 3. In order to better the buyer's chances, the earnest money deposit check should be made out to: A. "TITLE." B. the buyer’s title company. C. the seller’s choice of title company. D. None of the Above

76. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 4. Regardless of what the purchasers list their names as in the offer, they can reassign it later. A. True B. False End-of-Course Quiz

77. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 5. The proof of funds should be: A. A bank statement. B. A pre-approval letter. C. An approval letter. D. Any of the above End-of-Course Quiz

78. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 6. A CMA is: A. A Competitive REO Analysis B. A Comparative Market Analysis C. A Cash Monies Authorized End-of-Course Quiz

79. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 7. A BPO is: A. A Broker Price Opinion B. A Broker's Positive Outcome C. A Buyers Proof of Option to buy End-of-Course Quiz

80. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 8. The suggested closing date to enter in an REO purchase agreement is: A. 5 days. B. 10-15 days. C. 21-45 days. D. None of the above End-of-Course Quiz

81. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 9. In a contract - the INTENT: A. Is based on the earnest money deposit amount. B. Is an agreement between the buyers and their agent. C. Must express the parties’ present intent to contract. D. All the above End-of-Course Quiz

82. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 10. The best way to prepare an REO offer is: A. To type it using online templates. B. To verbally present it to the seller's agent. C. To hand write it. D. To have the buyer present it directly to the seller. End-of-Course Quiz

83. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 11. The offeror is TYPICALLY the: A. Buyer's agent. B. Buyer. C. Seller. D. Listing agent. End-of-Course Quiz

84. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 12. In a purchase agreement, the seller's Limit of Liability is for: A. Repairs B. Amount they may be liable for if the seller defaults C. Both A & B End-of-Course Quiz

85. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 13. In an REO purchase agreement, you should allow the seller: A. 24 hours to respond. B. 5 days to respond. C. 10 days to respond. D. None of the above End-of-Course Quiz

86. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 14. HUD stands for: A. Home Under Default. B. Housing and Urban Development. C. Housing and Urban Defaults. D. None of the above End-of-Course Quiz

87. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 15. In a HUD home, Fair Market Value is determined by: A. A BPO. B. The selling agent. C. The listing agent. D. A licensed FHA appraiser. End-of-Course Quiz

88. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 16. In a HUD Home: A. Occupancy prior to closing is completely prohibited. B. A lease may be obtained prior to closing. C. All the Above End-of-Course Quiz

89. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 17. FHA stands for: A. Federal Housing Administration. B. Financial Help Association. C. Federal help Administration. D. None of the above End-of-Course Quiz

90. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 18. In a HUD home, prior to approval, the earnest money is held by: A. Escrow. B. The selling broker. C. The listing broker. D. The seller. End-of-Course Quiz

91. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 19. The original HUD offer, and Contract Package must be received within _____ business days after the bid is posted under “Bid Results.” A. 2 B. 3 C. 5 D. 10 End-of-Course Quiz

92. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 20. The form titled: Broker’s Agreement to Abide by HUD’s Earnest Money Forfeiture Policy must be signed by: A. The broker. B. The buyer. C. HUD. D. The lender. End-of-Course Quiz

93. “Writing an Acceptable REO Offer” 3 Hours C.E. CE 5056002-RE (Classroom) 3 Hours Contracts Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.