This is not a game for the mild. It takes guts,cash, and the ability to do the work yourself, so you can make a profit. The most important ingredient I believe, is a good Real Estate professional that you can trust! (ME) You need to know what is the highest amount you will be able to resell it for and what the costs of that sale will be. If you work with a Realtor who is out to make a fast deal it can cost you all your profit!
You need to find someone (ME) who will give you the truth and is in it for the long run.
Recently, I know a guy who is looking to do this. He knows me casually. I found out he is using a real estate agent that has been licensed 1 year! Probably a friend. I don't care how honest or hard working a person you are. 1 year compared to 28 years experience is a big deal! I am sure somewhere along the line he will realize that experience might just make or break his deal. I will keep you posted.
The biggest challenge in buying a bank owned home is money. Either you have cash or you will have to find financing and this is very tricky. The process to get a loan on a bank owned or distressed property can push you over the edge on your purchase. There are so many rules, and different options to navigate.
A couple things to look out for.... Most of these properties come with long addendums. These addendums tend to tell the buyer if they use the recommended title company of the seller, the seller will pay for title charges. I have a title company that will ony charge an extra $300.00 on your purchase if you want to make sure the title work is done correctly. Title work is insurance and it is all covered under the rules of the government so as long as you have title insurance you should be fine. But watch out if you are buying a VA property. They do not offer or pay for title insurance. I would highly recommend you paying the money to have coverage. These properties are in such a mess when it comes to clear title. The insurance is worth every penny.
Another item to watch out for is transfer tax. Traditionally this has been paid by the seller. We are seeing language that is confusing on this causing the buyer to get stuck with the cost. You have to watch every little item on the Good Faith estimate. (which most buyer can't read or understand)Some banks will outright charge the buyer the transfer tax. These addendums are starting to dig into the buyers pockets more and more. The Fannie Mae addendum just changed so if you read it two weeks ago it is not the same. Always read it to know what your charges will be so you can make an educated decision on your purchase.
The other problem, and I don't understand the thinking on this, is the governments repossessed homes tend to have a time period in which they will only accept owner occupant buyers. DON'T LIE ABOUT THIS! The repercussions are not worth it. Huge fines and sometimes the loss of license for the agent. The problem that I see here is sometimes the guys that know how to rehab a home would be the better buyers. They would in fact help bring the market back by reselling these homes at a higher improved price! I just don't get the government. If it was up to me HUD would have a loan product for rehabbers that have shown the ability to fix up homes and re sell them. In fact I would give them first right on the properties.
A lot of buyers are concerned that they are not going to get a fair shake on an offer if they don't work with the listing agent. One of my good friends in the business who has been a major bank owned lister will tell you his entire office only sells 7% of their own listings! In fact if the asset manager sees a listing agent selling most of his inventory and not co broking that listing agent could lose the business. NO major listing agent is going to take the chance to double side a deal to make maybe an extra $1000.00 and lose their supply of business. I am not saying everything is always fair but for the most part these guys are so swamped by their inventory and endless paperwork that they don't have time to screw around.
I had a bank owned property that had multiple offers. The highest offer was way over what the asset manager took. The reason why is the particular property was limited to a renovation loan or cash. This was listed in the MLS. Do you know how many agents wrote FHA offers on it? It was astounding because the house would never fly FHA!
If you want to play in the resale game get a good Realtor with experience, someone who wants to sell you more and more properties and be a partner in your success! They need to understand the different types of financing and what will fly. They also need to give you input on what to do, to best sell the property. It is a partnership. If you are out there just calling listing agents all I have to say is Caveat Emptor.