For the last few years buying a bank owned home has had its difficulties but be ready for more of a challenge if you are looking for a bank owned home now. Prices are rising and the banks know it. For the last few years the banks have taken a beating and have had to give in on pricing over and over but those times are going away. The banks are now more of a challenge to work with as they are being more demanding.
Bank owned homes can still be a good value but you need to realize there is more competition for one.
What price do I offer?
Do your homework and make a good offer based on current market conditions and the neighborhood. Banks are sometimes overpricing homes and sometimes underpricing them. You need to make a good assessment of what is going on. Be sure to ask your agent how long the property has been on the market -- was it listed previously by the bank? If it was listed recently and removed from the market this might be indicative of problems with the home. For example, if the property tested positive for meth it could have been taken off the market for remediation and put back on after it has been cleaned up. There could have been other problems as well. Sometimes the bank will take a property off the market to fix it up and make improvements in order to get it sold at the right price point or to have it qualify for a loan.
If a property will only go cash then the number of people which can or will make offers on it is diminished. This means the property will sell for a lower price and it usually needs to because you, as the investor, are taking some risk.
Properties which are in bad shape need a lot of work and that can mean time and additional risk. Be sure you involve the right people and make good estimates on how much it will cost to repair a property. Jumping into a big remodel when you haven't done one before is a big step. Start off small and learn to do remodeling the right way before jumping in on something big. You might want to be aggressive but do take care not to get in over your head. We see that all too often in this business.
Ask multiple neighbors about the property and keep in mind that some neighbors might give good information and other may give bad information. It's important to get a good picture.
Asking your agent for price graphs for similar homes in similar areas can be a good idea. Then you can see where things are headed. Seeing the comps is one thing, but seeing the big picture is helpful too. That said, things can change overnight. The economic situation is not all roses and there will be ups and downs. That has certainly made things more difficult as some see the market getting better and others see it getting worse. You can imagine that such scenarios can play havoc on choosing the right price!