Make an REO offer the

bank can’t refuse

Presented by Todd Ewing
Evolution of an REO
Priorowner defaulted on a loan
Lender instituted a foreclosure proceeding
Unsuccessful foreclosure auction
Property reverted back to lender (bank)
Tips for REO offers
Set expectations for yourself and your buyer
Make your offer successful
Protect your client
Set expectations
Remember, you’re dealing with a bank
◦ Don’t expect an answer for several days
◦ Most banks outsource REO properties to asset
managers who work 9 to 5
◦ Process could take at least 45 days

Benefit of the bargain is RISK

◦ Risk is transferred to your buyer when negotiating an
REO property
Set expectations (cont.)
Obtain “Instructions for writing an offer” from the
listing agent if available
◦ Make sure information is complete

Make the listing agent’s job easy

Make a successful offer
Demonstrate your buyer has a funds
◦ Pre-approval letter from mortgage lender
◦ “Proof/verification of funds” to clearly demonstrate you
have the minimum 10% liquid (i.e. “in the bank”)

The bank wants to see 1% to 3% for a good

faith deposit
Make a successful offer (cont.)
If it appears competitive, take preemptive action
◦ Write the contract “AS-IS”
◦ Bank will usually counter with “as-is” anyway

Try to avoid FHA financing in your offer

◦ You can always change your financing option later

Try to avoid asking for closing cost credits

◦ Bank is interested in net pricing
Make a successful offer (cont.)
AS-IS means “as-is” on a REO property
◦ You can write a general inspection contingency
◦ Only option to void the contract
◦ Bank will rarely agree to make repairs

Request confirmation of receipt from the REO

listing agent when submitting an offer

Make the listing agent’s job easy

Protect your client
AS-IS means “as-is” on a REO property
◦ Water & utilities could be shut off, and your buyer may
not be able to conduct a thorough home inspection

Write in a home warranty to be paid by the

seller
◦ Bank will probably counter, but sometimes they agree
Protect your client (cont.)
Write in that seller will pay ALL outstanding &
delinquent condo/HOA fees (not just those
allowed by law)
◦ Bank will probably counter; sometimes they’ll accept

Write in 100% of all transfer/recordation taxes to

be paid by seller
◦ Bank will probably counter; sometimes they’ll accept
Protect your client (cont.)
Order title work as soon as the offer is accepted
◦ Many REO properties have serious title issues

Don’t let the REO asset manager force you into

using their preferred title provider
◦ May insure over unreleased trusts or other title defects
to move the asset along on behalf of the bank

Allowat least 45 days to close in the current

market
 Take advantage of
property tax appeal
Presented by Joe Gentile
Tax appeal could save thousands
Despite a real estate implosion, property tax
revenue collected by states and localities
actually rose 2.7% last year to $421.8 billion,
according to the U.S. Bureau of Economic
Analysis.
Appeal property taxes in 4 steps
Track down all the paperwork
Understand the process
Collect your evidence
Follow up on the appeal
Track down all the paperwork
Obtaina petition (application) from your
assessor’s office
Understand the process
Initial
appeal typically informal, sometimes face-
to-face, in writing or by telephone
◦ Most appeals are resolved at this level

Ifdisputed assessment is not resolved, the

appeal goes to a board-level review

Ifstill not resolved, a final appeal can be made

in a court of law
Collect evidence
Prove the property assessment is too high
◦ HUD-1 Settlement Statement
◦ Appraisal

Focus on points that specifically affect values

Every property owner is entitled to obtain a free

copy of their property worksheet and a sales list
for the area where the property is located
Follow up on the appeal
Maryland
◦ For property purchase between Jan. 1 and June 30,
new owner has 60 days from settlement to appeal
◦ Any homeowner may file within 45 days of receiving
assessment notice (typically every 3 years)
◦ File “Petition for Review” by Jan. 1 of any year

District of Columbia
◦ Appeal within 30 days of annual assessment and no
later than April 1
Maryland Withholding Tax
Presented by Catherine Schmitt
What is the Maryland Withholding Tax?
Income tax withholding that affects:
◦ Maryland non-residents
◦ Maryland non-resident entities

Often a major surprise to the seller

Avoidable if the seller is able to acquire a

Certificate of Full or Partial Exemption
How does it work?
Since 2003, Maryland law has required
settlement officers to withhold sufficient funds
from proceeds of sale for tax.
◦ 7.5% for Maryland non-resident
◦ 8.25% for Maryland non-resident entities

Tax is paid to the recording office at the time the

deed is submitted for recordation
◦ Will not record until tax is paid.
How does it work?
“Total payment” for withholding tax equals the
total sales price minus debts & expenses
◦ Debts of the seller securing the property
◦ Expenses arising out of sale of the property
When is your client affected?
Non-resident means the seller:
◦ Is not a Maryland resident
◦ Has not lived in the property as a principal residence
for 2 of the last 5 years

Non-resident entity (next slide)

What are Non-resident Entities?
Not formed under the laws of Maryland more
than 90 days before property’s date of sale

Not qualified by or registered with the

Department of Assessments and Taxation to do
business in Maryland more than 90 days prior to
date of sale
Examples of Entities
A Trust that was not formed under Maryland law

AnEstate where the descendent was not a

Maryland resident
Certificate of Full or Partial Exemption
A non-resident can walk away with all the
proceeds of sale by acquiring an exemption
◦ Apply for the certificate no later than 21 days before
closing

*Bestto apply once the sales contract is

executed.
What are the exemptions?
1. Seller is a resident of Maryland

2. Property is the seller’s primary residence

3. Property is transferred pursuant to foreclosure

or a deed in lieu of foreclosure
What are the exemptions? (cont.)
4. Property is transferred to the government

5. Statement indicating the consideration paid for

the property is zero

6. Certificate issued by the Comptroller stating no

tax or a reduced tax amount is due (see next
slide)
Comptroller will issue a certificate if:
1. Transfer is made on an installment sales basis
2. Seller is tax-exempt entity
3. Transfer is to a partnership in exchange for a
partnership interest, no gain or loss
4. Like-kind exchange
5. Transfer is between spouses or incident to a
divorce
Who files the requisite forms?
 Settlement agent or attorney

 If the seller is paying as part of settlement, the

agent/attorney will file the forms and pay the
money directly to Maryland

 If seller wishes to file for exemption, then the

agent/attorney will file ASAP, no later than 21
days prior to closing
Thanks for your attention
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