Foreclosures: They are everywhere and Washington DC is no exception. While the District itself has not been hard hit; some parts of the city have a good number of foreclosed homes and some of the Maryland and Virginia Suburbs have a good supply.
On one of my previous posts about Bank Addendums...a pain I wrote about what to look out for in the Bank's contract addendum when buying a Foreclosed Home.
Here I want to talk about something most important. Asking Price.
Just as with normal Sellers; there are always a couple of different pricing strategies when setting a price to sell your home.
- Just over - what you think it will sell or should sell for. After-all; buyers probably won't pay full price - so if you price it 5-10% high; you have negotiating room down. This is a BAD idea. Buyers are looking for the deals. If you are too high - they will never come in the door.
- Exactly at - the market price. You are still going to have buyers asking less than full price; so now it becomes about how good the condition of the property is in. Excellent condition will probably net you closest to 100%. Not a bad idea.
- Under Price it - we all want a deal. A low price gets us in the door in a hurry! Once we are in the door and think we are getting a steal - we are more willing to spend more. Good Idea.
The Banks are learning about Pricing.
My analogy:
The Day after Thanksgiving Sale.
We all know the stores that advertise the deep discounted merchandise on the day after Thanksgiving. I also know that the supply of DVR's for $29 runs out in about 20 minutes from the start of the sale. OK fine - so then the customers will buy the $50 ones until they run out and the last bunch; since they are already there - might as well buy the $69 model. The same holds true for a home.
We get 3 or 4 buyers into the home and they all like it. They all start making offers and then the bank says - "Give us your best and final". Well if the house is 40% off - why not pay a little more. You can still get it for 30% off.
Many Foreclosed Homes in the area are seeing Multiple Offers. Buyers are still getting great deals; but they need to be prepared to offer Full Price or a bit more. Prices are down - way down in many areas; and buying homes is becoming back into style. With Interest Rates at rock-bottom lows and tax incentives for 1st Time Buyers - buying is back.
Look at my Foreclosure I closed on last week:
Asking Price: $410,000. Surrounding home sales between $490-540K. Multiple Offers. My Buyers paid $420k; with most of the closing costs paid. Their appraisal came in 60k OVER what they paid -- and appraisals right now tend to be on the conservative side.
Did the buyers get a good deal? They sure did!
Now this does not apply to all Foreclosures nor does it apply to all Neighborhoods. But - when you see a Foreclosed property in decent shape at a reduced price - don't think the bank will be giving it away. Be prepared for some competition from other buyers. 
My general rule of thumb:
- Nice Neighborhood.
- Well Priced compared to neighbors.
- Good Condition.
- New to the Market.
Be prepared to offer Full Price or don't bother even looking at the property. You are probably wasting your time if you want to offer 10-20% less than asking price. Wait until its been on the market for 30-60-90 days; then go in for the kill on price. But - if it IS really a bargain - it will be sold much sooner.
Happy Home Buying....
Contact James Downing of the Downing Real Estate Group, if you are selling, buying or have questions!
Office: 202-362-5800 Cell: 703.244.3971
Licensed in Washington DC, Virginia & Maryland.
Coldwell Banker Residential Brokerage - Chevy Chase
5028 Wisconsin Ave NW Suite 100 * Washington DC 20016
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