This article contains excerpts from my column in the August edition of the Economic Journal of Mohave County.
It’s no secret that foreclosures (and the banks that own them) are having their way with our real estate market in Bullhead City. Their presence has changed the game for both buyers and sellers.
If you’re selling, trying to sell, or thinking about selling and you’re ready for some straight talk about competing in today’s market, you’ve come to the right place.
Here are five facts that every seller ought to know about foreclosures:
1. Foreclosures are your competition
This is rule #1 for sellers and there are no two ways about it. If you’re a seller in this market your house is in direct competition with bank-owned foreclosures.
2. Foreclosures get half the buyers
175 of the 357 Bullhead City homes sold in the first half of this year were foreclosures. That’s one of every two sales.
3. Banks have no emotions
While we are trying to sell our homes, banks are trying to dispose of their assets. They have no emotional attachment to the real estate they didn’t want to own in the first place. Their selling price is not based on how much they paid or how much they need. They sell for what the market is willing to pay.
4. Foreclosures set prices (sort of)
When I say banks are having their way with our market, I mean they are setting market prices by under-selling the competition. But that’s not really true.
The truth is buyers are setting prices, as they always do, by voting with their wallets. When banks accept those votes (offers), they indirectly set prices.
5. Foreclosures sell faster and for less money
Because banks have no emotional attachment, and because they can and will sell for what the market is willing to pay, they got half the buyers this year. This foreclosure reality isn’t pleasant for those sellers that can’t or won’t compete with their prices, but it is the reality nonetheless.
It’s not all fun and games for buyers, either. Sure they benefit from lower prices, but the foreclosure game is not for everyone. If you’re a buyer thinking about the foreclosure game here’s what every buyer ought to know about foreclosures.
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{ 3 comments… read them below or add one }
Banks have no emotions and sometimes don’t use logic when looking at offers and negotiating a sale. So what may make sense to you may not necessarily make sense to a bank. Just my opinion.
Lonnie,
Thanks for your comment. I don’t think you and I are far off on this one. What you mention is one of the many frustrations our clients deal with.
My point about banks not having emotions is that they are not tied to their “asset” in the same way that many homeowners are tied to their “homes.” That is not to say that everything they do is logical.
Not by a long shot.
Still, I think the primary reason their foreclosures sell over the competition is their willingness to price where the market is. Do you agree?
Yes, banks are looking at just moving the property whereas a homeowner could be handicapped by needed a specific amount just to meet all the debt obligations to the property without having to contact the mortgage holders and negotiate a short sale.
Generally speaking, a homeowner, especially in this market, has seen the value of their home drop, which I think can make it harder to emotionally let go of a home. If I paid $150,000 for a home 2 years ago and today you’re telling me I MAY be able to get $100,000 for the home, that’s a tough pill to swallow. Whereas a REO, (Real Estate Owned or foreclosure) asset manager is just looking at trying to move the home off their books.
When this current cycle started, homeowners were more willing to offer incentives to help move a home, ie paying closings costs or buying down the rate, where the REO homes were unwilling to do so.
Today, the REO asset managers are willing to particpate in helping borrowers with their closing costs so that competative advantage has swung away from the homeowners.
And we could start a whole new stream talking about the challenges then of getting a home to appraise in today’s market.
Evan, you bring good content and value to your community trying to help educate everyone to the market as it is today. Keep up the outstanding work