Bank REO purchase strategy

[Michael Baybut]

Hi,
This is a bit of a follow up from my previous post. I'm very interested in a REO property that's about to come on the market soon. I tried to buy it as a SS but it ended up at foreclosure. The bank had accepted my offer but couldn't get it all together before the other department foreclosed. I'm trying to get the jump on it as soon as it hits the market. It has numerous issues that would put most, but not all, people off. I will be using bank financing @ 80%. I can go 70% if it helps any. I'm quite familiar with the property and all it's major $$$ issues. I was going to have my offer go in with no inspection contingency and no appraisal contingency, ( my feeling that the property is easily worth what my final offer would be, especially if I put down 30%) so the bank financing should be covered there. Just wanted to see what other investors thought about going about it this way, or any advice they could give.
Thanks in advance,
Mike

[Steve Babiak]

Originally posted by Kelly D.:

...

Our agent was told by a FNMA rep that they (FNMA) were required to make repairs before they put the home up for sale. This seems counter to just about everything we've read or been told about REO properties. Can't see why they would put money into a home that requires a complete gut now and possibly mold remediation since no one bothered to clean place after the pipes burst. No work has been done to date. It looks like someone finally came last week to clean the ceiling collapse debris off the floor but that was it.

...

They will do things to make the property "safer" to go through so there can be showings with less risk. Drywall boards will be screwed to the ceilings, but not properly hung and taped - just screwed over the areas that are collapsing.

Stairs will get railings - nothing fancy, just pieces of wood to allow for handrail. Windows will be boarded if broken. Electricity will probably be turned off so that poses no hazard. Exterminator will fumigate if necessary.

Those are the types of repairs they will do.

Now, if the mold is severe, or if it is determined to be the hazardous black mold, then the bank might require the prospective buyers to sign a release form before going inside. Respirators are a good idea for this scenario, if it is encountered. Many types of mold fortunately aren't seriously hazardous.

For what it's worth, I've seen electricity on in a few cases. One where they wanted people to realize that the central AC worked fine. Another where the basement had a sump pump that had to run 24-7 - seems that there might have been a natural spring too close to that house. Good flashlights, and spare batteries just in case, are essential if you are going in to see REO properties.