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4) Negotiate a purchase agreement. Once you make contact with the bank's asset manager or REO officer, arrange to walk through the property (with your agent if applicable) to make sure it fits your criteria as a buyer. If both you and the bank agree to proceed, negotiate the terms of the purchase agreement.

NOTE: If you live in a state that allows a redemption period for the owner after the bank takes ownership of the property, you may have to wait several weeks or several months, depending on the state, before the bank is willing to sell the property. During the redemption period, the owner can regain ownership of the property by paying the total amount owed to the bank plus any applicable foreclosure expenses.

The bank's primary goal is to at least break even on all the costs that it has sunk into the property. That includes the unpaid balance of the loan, the expenses associated with the foreclosure proceedings, other liens and repairs to the property.

Your goal as a buyer is to purchase the property below market value, minus any estimated repair costs. This is often possible if you contact the bank quickly and are a prepared buyer ready to make a purchase.

To get a better bargain, consider these:

• Buy the property "as is." For more on "as-is" offers, read this.
• Prove you have the financing and can close quickly. Pay with cash or show your pre-approval letter. Be ready to show proof of income.
• Work with lenders that have a glut of foreclosures. These are non-performing assets from their perspective, so unloading them is to their benefit.
• Build relationships. Let the asset manager or REO officer know to contact you in the future if the bank needs to quickly unload foreclosure properties.

5) Close the deal. Once you've arrived at an agreement with the bank, put the agreement in writing. If you're not familiar with how to draw up a purchase agreement, ask a local real estate agent or real estate attorney. The purchase agreement should make closing the deal contingent on 1) a full title search conducted by a title company or attorney and 2) a professional inspection of the property (even if you're willing to buy the home "as is," you may find out there's a foundation problem and choose to end the deal).

An escrow company, which acts as a third party, can manage the transfer of money and property ownership. Assuming that you have your financing secured, this should be a fairly smooth process.

There is no set time frame within which the banks must sell their REOs. However, banks often want to get REOs off their books rapidly. As a result, many REOs sell quickly.

MORE...

• Foreclosure Buying Guide
• How to Break Into The Foreclosure Market
• The Three Faces of Foreclosure Buying
• Advantages and Disadvantages of Buying a Foreclosure
• Tapping the Growing Short Sale Market
• Buying Pre-Foreclosure Properties
• Buying at Foreclosure Auctions