It gives them a year to repossess the property and resell it as an REO without losing it outright.

Rehabs (fix up and resell) requires a good working knowledge of multiple factors, and in my opinion should be left to more experienced investors.

This is letting them acquire properties higher than most investors and reselling above market value. 

Be carefulReason: some local investors purchases several different bundles of bad area properties and resell to out of state investors. 

.- Buy and then resell a vacant lot at the county delinquent tax sale.- Buy supplies and equipment - start a venture to provide clean-out of severly distressed (trashed) properties.

So far, it doesn't make sense to add on a bed and bath for either rental or resell.

The house had been auctioned and was purchased by someone who resells properties to investors.  

Some won't allow you to resell for a certain amount of time after you own it, some will allow immediate resale but only for a certain amount above the amount paid for it. ie Fannie and Freddie won't allow you to resell for more than 120% of purchase price within 3 months.

To add some info and to clear up some misconceptions from this thread:- You can *NOT* assign an REO, per the addendum you will sign along with the purchase contract;- A few banks (most notably FNMA and BoA) have deed restrictions that say you can't resell under certain circumstances after you buy.

You look to have alot of experience in buying and reselling for profit.