Bank Owned (REO) properties are the assets that banks are unable to sell for cash at the Foreclosure Auction which causes them to take possession and secure them for marketing them to retail buyers.
For starters you are NOT negotiating with the bank directly and there are 2 entities between you and the bank. One is the REO Listing Agent. The 2nd entity is the Asset Management company retained by the bank to liquidate that asset with the help of the REO Listing Agent.
One of the best strategies we have observed by several cash investors in buying San Jose REOs is a clever technique which we will document here since they have happened on the REOs where we were the listing agents for the bank.
Here are the successful method that we have seen work on our own REO Listings:
1) Write a Cash Offer: Your best chances of acquisition are with AS-IS cash offers without any contingencies. You can get help from Hard Money Lenders who can help you cover 70% of purchase price, specially if you are going to rehab and flip these properties.
2) Order an Inspection: Banks have their own standard purchase contract that contains specific language that will discourage the buyer from requesting ANY credit for repair.
3) Get Repair Bids: Get at least 2 repair bids from licensed contractors specially if the repairs discovered during your inspections will cost more than $30,000 to fix. licensed contractors for about $30,000 of repairs.
4) Request Repair Credit: Despite the fact that you have signed an AS-IS Purchase Contract that forbids you from asking for repair credit, you should now amend your contract with the exact repair dollars that your contractors have submitted. You will be pleasantly surprised that you will receive 80-100% of the repair credit you request cause the banks recognize that if you cancel the contract it will add another 45 days of delay to the closing. money you have requested.
5) Hire the Right Team: Work with the Real Estate agents who have represented banks on REO Listing since they have invaluable experience that can help secure properties at great discounts. Even writing a clean Cash Offer seems to be very difficult for most Realtor who find clever ways to diffuse the power of their cash offer and kill their buyers opportunity to win a property!
Feel free to Contact Us if you are looking to buy REOs in San Jose.