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Buying/rehabbing an REO property?

We were going to buy the house we are renting, but have decided to move back to our hometown, Chicago. We spotted a bank-owned home on a real estate site, and it looks like a surprisingly attractive buy. The area is fantastic, with a good stock of homes, and it's a haven for city workers, so the market is stable.

The house we found is a 1939 Cape Cod, and it is a remodel-on-hiatus, for lack of a better description. According to the agent and the listing photos, the house needs an updated HVAC system, a complete kitchen (the kitchen has already been gutted), a handful of new windows, two new bathroom vanities, and some minimal finish carpentry and landscape work. The lot is nearly a double lot, and there is a fairly new detached garage. The house is priced to sell at around $140K. We are estimating that we will need to put roughly $30K into the property, and this is factoring in some sweat equity, and help from friends in the trades. The comps in the neighborhood are in the $200's.

Now...what complications might we face in the buying process? This is not a HUD, so I don't see where it would qualify for a 203K loan. What other options might we have to roll the remodel costs into the price of the house without losing it on the interest rate? And what time frame would we likely have to complete the repairs in order to be compliant with codes?

Note...we do have a buyer's agent lined up, but I'm looking from real-life advice from someone who's been there as a homeowner or contractor. ;)


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