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