One question i hear the most is "How did they come up with that price on that bank owned home?".  I am one of the leading listing agents of foreclosures here in the Manchester NH area. I work for several of the largest banks in the countriy and each has their own policy for pricing homes.

When a home is taken back by the bank at a foreclosure auction, it is given to an asset amanger usually from an asset management company to sell. That asset manager then assigns the listing to an approved local agent, one that has usually done a good job for them in the past. Skipping forward once the house is vacant, secured and cleaned; it is appraised. The listing agent will assess what it is worth and the bank will hire a 3rd party either another agent or a full blown appraisal to compare it to.

This process usually causes the first problems in pricing. You have agents assigned a BPO that think if they price it real high they will get the listing, sorry that is a myth, it is already assigned... Then you have banks that will pay an extreme low amount for an appraisal, therefore most appraisers wont take the work, so you mostly get out of town appriasers who need the work and who may not know the neighborhoods or local values which causes appraisals to come in too high.

There is 3 distinct thoughts when it comes to pricing a foreclosure.

1. 30 DAY QUICK SALE: This is the most popular pricing method. It is oftne used for home sthat areneed of some repair. Often they are listed as a cash sale only with no contingincies such as for  inspections or mortgages that can fail and the property comes back on the market.

2. 90 DAY PRICING commonly known as the retail price. Typically this price right at market value if not a little above. They then will reduce the price each month until it sells. I have only 1 bank that practices this and i was told it is to slow losses. For me it increases losses as they have to pay to maintain it, heat it and risk further loss from theft or vandalism.
 
3. COMPLETE RENOVATION TO RETAIL: Mostly used by fannie or freddie, it is where they pay a heck of a lot to repair a house to move in condition. They replace wells, septic, roofs, furnaces, kitchens, appliances, paint and flooring.  The house looks nice however, if lucky, they get back the same amount as repairs but often lose money instead of just selling it as is to begin with.

Investors are already buying houses that no one can get a mortgage for becuase they need too much work. Usually an investor can get the work done at a better price than teh banks and then put the homes back on the market to owner occupants. They take the risk and pay the expense.

In conclusion although it seems that there is no rhyme or reason to pricing there actually is. The banks method of thought is what drives pricing. Banks that actually listing to their listing agents sell far many homes easier than those that have strict policies that are based on national trends and not local trends.

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