| The "Top-Down" and "Bottom-Up" approach to Bank | | | | frequently, and most of the time the property is in |
| Owned Foreclosure Properties | | | | really bad shape - red tagged by the city or attached |
| Buying bank owned properties is one of the best | | | | to some other major problem, like fire damage etc. |
| ways for wholesale buyers to find discounted bargain | | | | When the bank has the guts to list the property very |
| homes that can be passed on to rehabbers for a | | | | low, it often happens that rehabbers will bid up the |
| small fee. Rehabbers can benefit greatly from | | | | price. |
| wholesale buyer's service: Identifying and negotiating a | | | | It is very important to scan the MLS every day for |
| lucrative deal. Banks are very motivated sellers, | | | | new listings because "Bottom-Up" listings usually don't |
| although most of the time, they don't act like it. But that | | | | last very long at all but are sold within days. |
| can quickly change, once the reality of a flat or | | | | With this strategy, too, you are looking to get an offer |
| declining market and rising inventory on their books | | | | accepted that is low enough to flip the property to a |
| sets in. | | | | rehabber. |
| What are the best strategies to find bank owned | | | | How can a foreclosure wholesale buyer make |
| properties? | | | | money? |
| There are two general concepts that you should | | | | No matter if your strategy is "Bottom-Up" or |
| follow in your foreclosure and wholesale business | | | | "Top-Down", as a wholesale buyer you go through the |
| model: "Top-Down", and "Bottom-Up". Which concept | | | | tedious process of finding the properties that have to |
| applies depends on the bank's listing tactic. | | | | be sold. |
| "Top-Down" | | | | Some banks (and other sellers) may hold out longer to |
| The "Top-Down" approach is more common. You | | | | try and find a retail or move-in buyer. Others seem to |
| apply this when the bank lists the property on the | | | | have a policy (or an asset manager) that doesn't allow |
| Multiple Listing Service (MLS) at or near the "fair | | | | them to sell below a certain percentage of the |
| market value". Usually nothing happens for a while, until | | | | "perceived value". |
| the bank lowers the price, and lowers the price again... | | | | Rehabbers and other buyers rarely have (or take) the |
| and then again. - In a declining market this can go on | | | | time to make as many offers as it can take to get a |
| for months and is referred to as "Chasing Down the | | | | lucrative deal directly from the bank. So it adds real |
| Market". Once the listing is at least 90 days old, and | | | | value to the market place when the wholesale buyer |
| has already been reduced a few times, you will make | | | | hammers out the best deals and supplies them to the |
| a cash offer at a wholesale price level. | | | | local rehabbers or owner occupied buyers. |
| Your goal as wholesale buyer is to get an offer | | | | One of the great advantages of buying bank owned |
| accepted that is so much below the listing price that | | | | properties is that you have virtually no advertising |
| you will be able to flip the property to a rehabber. The | | | | overhead finding the deals, because the motivated |
| total price to the rehabber should be below the current | | | | sellers are readily available with a search on the MLS. |
| listing price, once you've added your "assignment" fee. | | | | You can work with your own buyers agent when |
| "Bottom-Up" | | | | making offers. It doesn't make a difference to your |
| The other strategy, "Bottom-Up", applies when the | | | | bottom line cost, and a good agent will help you find |
| bank lists the property at an extremely low price right | | | | better properties and streamline the offer process. |
| on the first day of the listing. That occurs less | | | | |