Five Must-Haves for An REO Purchase Agreement

By on July 24, 2015

If you’re planning to buy a real estate owned (REO) property, you’ll have to submit an REO purchase agreement. This agreement shows your intent (and ability) to buy the property from the lender.

REO departments are busy and often manage hundreds of properties at a time. If your purchase agreement is incomplete, the lender may pass on your offer and accept the next bid, so it’s important to get it right the first time.

Proof of financing

The lender will want proof you can pay for the property before approving your bid. If you’re financing the purchase of an REO, you’ll need a pre-approval letter from your lender showing your pre-approval amount, down payment amount, and the contact information for your loan officer.

If you’re paying in cash, you’ll have to prove you have the funds to cover the purchase. Obtain a letter from your bank that verifies you have more than the purchase price in reserves.

Earnest money deposit

Typically lenders will require an earnest money deposit for REOs. In most cases, you will need a minimum of $1,000 to put toward an earnest money deposit. If you’re paying in cash, lenders may require a larger deposit. You may pay 10% or higher toward an earnest money deposit.

All REO purchase agreements should contain a copy of the check used to pay your earnest money deposit. Without this, your offer won’t be accepted. If you’re not sure what to put toward your deposit, check with your REALTOR®.

Purchase addendums

Most lenders won’t accept an offer that doesn’t include the necessary addendums. REO properties are sold “as is.” If you’re submitting an offer, you’ll need to sign a waiver releasing the lender from the responsibility of any damages or problems with the property.

If you’re buying an older property, you’ll also have to sign a mold disclosure agreement, a wood infestation report, and a lead-based paint report. While lenders in some states will pay for a pest inspection, you should have your own inspector inspect the property before completing these forms.

Miscellaneous documents

Some state and local agencies require additional documents to support your purchase agreement. The lender may also require additional information from you. Talk with your real estate agent, who will know if you need any additional information for your purchase. If you do, be sure to fill out the forms correctly and include all pertinent information.


Generally, lenders want to receive REO purchase agreements online through their own secure portals. If you’re submitting information online, be sure to scan low- to medium-quality black-and-white copies of all your documents.


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