How can you buy a Fixer Upper REO for $40,000 less than the list price!?

REOs are bank owned properties that don’t sell at Auction and banks have to take them over.   Once they are listed for sale to public using a local Realtors, the games begin where the banks and investors are on a collision course since each have diametrically opposing goals.  

Investors want to pay the least amount of money and banks want to Maximum Net.   One of the best strategies we have observed by several cash investors 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 what happened on our own REO listing:  

1) Got a cash offer which our selling bank accepted for $310,000 for a property which was listed for $359,900.  The offer was accepted at $325,000 after several counters.  Typical of  an REO purchase contract it clearly states that the bank will not pay a DIME for the repair requirements discovered during the inspections.   This is an AS-IS purchase contract.

2) Buyer orders an inspection and get 2 bids for repairs from licensed contractors for about $340,000 of repairs.

3) Request credit from the bank for the repairs recommended by the inspection.  Yes, despite the fact that the Selling bank and the buyer have inked an AS-IS deal, the banks routinely reduce the sale price by as much as $15-$25,000 just to keep the deal alive.

4) Buyer amends the purchase contract to reduce the purchase price to $295,000!  And the bank despite the AS-IS clause in the purchase contract agrees to the price reduction!!

That more than $64,900 discount to the list price and goes a long way to cover debt service. With rents on the rise, this is a good strategy to acquire rental properties using REOs.   Do you think you can use such a strategy in purchasing an REO!?

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