| Bank owned properties, also technically known as | | | | lower offers for sometime until they discover that |
| REO (Real Estate Owned), are today the most | | | | nobody is willing to bid anymore. At that time they |
| profitable and active segment of real estate investing | | | | usually accept a lower offer. |
| in the United States. They are easy to find, the bank | | | | The more rehab work is required on the property, the |
| itself advertises them, and they require a relatively | | | | easier it will be to get a very good price, but this |
| short negotiation: between a few days and a couple | | | | demands closer attention to evaluating the costs and |
| of weeks at the outside. The negotiation is based only | | | | then finding the right contractor that can perform within |
| on the capability of the potential buyer to buy cash | | | | those costs. |
| (the so called proof of fund letter or statement) and on | | | | You will find that it is always good to involve two or |
| a knowledge of the condition of the property in terms | | | | three contractors as soon as the house is under |
| of market location and repairs needed. | | | | contract with the bank and before the usual one week |
| Banks today list their properties at prices which are | | | | inspection period comes to an end. In this way you will |
| fairly well aligned with the market, so to entice potential | | | | be able to walk away from the deal if you discover |
| home owners who wish to live personally in the house. | | | | that you offered too much compared to repairs |
| Gone are the days when they established their selling | | | | required and you wil get different ideas and costs for |
| price based on the remaining loan balance. Today they | | | | the rehab. |
| know how to market competitively and sometimes | | | | Call the same contractors that you plan to use for the |
| they even start with a price that is well lower the | | | | actual rehab and after you chose the one you want |
| current market value. If the basic elements are fine: | | | | for that job, you should do a final walk through of the |
| roof in good condition, functional plumbing and electric | | | | property detailing what will have to be done and |
| components and no structural damage, a retail buyer is | | | | where, putting everything in writing and defining both |
| likely to win against any investor since the home | | | | the scope and the timing of the work as well as the |
| owner is willing to offer much more and he is also | | | | amounts to be paid at the various stages, leaving a |
| ready to put up with the basic repairs that could be | | | | substantial quota for the final inspection. |
| needed to make the home fully functional. A broken | | | | The materials chosen for my rehabs are conceived to |
| water heater or A/C unit, new carpet and paint, new | | | | make the product interesting for both an American |
| windows are usually acceptable for an home owner | | | | and an European buyer. I therefore try to stay away |
| who can still get the house at a good discount. | | | | from carpet whenever I can using laminate or tiles. If |
| The investor has better chances of acquiring a | | | | the price of the house warrants it, I will put the same |
| property for a price that is right for him when he deals | | | | type of tiles pretty much every where, making sure I |
| with homes that require substantial work or that have | | | | get a very competitive price. The other key aspect to |
| been on the market for some time. I found that after a | | | | consider is selecting block homes rather than frame |
| couple of months the house has been listed, the bank | | | | homes whenever possible: they are so much easier to |
| becomes much more willing to deal with investors. | | | | sell to an international buyer. |
| Banks sometimes start a bit too high and don't accept | | | | |