Purchasing a home from a Bank, whether it is a Short Sale or a property already owned by the bank is not the same as purchasing a home from a homeowner/seller in a typical Real Estate Market. In a typical Real Estate market, Sellers have equity in their homes and there is room to negotiate comfortably. Banks have negative equity on short sale and their bank owned properties. It is a case by case situation with each property having a different loan amount owed to one, two or more lenders.
The properties that are sitting the longest usually have significant damage so it makes sense that the prices of some of the most severely damaged homes will go down. Unless the bank has made a decision to come in and rehab the property, (they will be doing more of this next year), they will almost never do any repairs to a distressed property.
However, the properties that are in the best shape and in the best locations will go up, and in some areas already have. The homes that are in the best shape and in the best neighborhoods are not lasting on the market very long. There are several offers on these prime properties as soon as they are listed. Some are being sold at significant amounts above the listing price.
Have Prices hit bottom?
Will Prices go lower? This depends on what you are intending to purchase. If you plan on purchasing a Distressed Bank Owned Property then the answer is, yes. This is due to the fact that the longer the property is on the market the more it is costing the bank to keep in on their portfolio as a foreclosed loan and the more they will be willing to reduce the price.
Many Distressed properties have major problems:
- Water damage is the biggest and costliest concern.
- Many distressed properties are missing their heating and air conditioning units all together. So for the property to be functional these must be purchased and installed.
- Vandalism is another problem with distressed properties. Owners who are distraught at loosing their home can damage plumbing systems by dumping concrete down the toilets or drilling holes that cannot be easily seen into the roofs. Also, When properties are vacant they are a target for routine vandals that have easy access through a door or window that has been left open sometimes by Real Estate agents or their clients after viewing the property.
Getting costs for all of the items that can be wrong with a distressed property can make a really low price seem insignificant. For instance, a distressed property listed for $190,000.00 seems great until all of the costs to make it livable again are calculated. Example: Spending $190,000 for a 2000 square foot house that you will have to replace carpeting, appliances, air conditioning unit, heating unit, plumbing and electrical items is really not such a good deal because when you are done you can end up spending $100,000.00 to refurbish the property.
If you want a home that is in fairly good shape and if you want your offer to be accepted, then you will definitely want to get a feel for what other offers are on the table and if you are intent on purchasing that property then you will have to try to beat the other offers that have already been submitted on that property.
- Offer over the listing price, (I provide the most recent comparable's for my clients)
- Don't ask for any closing costs, (except on VA, there are Non-Allowable's that the borrower cannot pay.
- Make a larger earnest money deposit. Many listings require 1% minimum. If you want your offer to be a priority then make it 2%.
- If you are not paying cash then have your pre-qualification letter submitted with the offer.
- Copy your credit report and "black out", your Social Security Number and Credit Account Numbers so that your FICO scores are available with the offer.
- Have a bank statement with account number, "blacked-out" so that the bank can see that you have money available to close.
Having all of these items available, up front, with your offer will definitely improve your chances of getting your offer accepted.
Why is it taking so long to get my offer accepted or to hear anything from the bank?
- Sometimes it is simply a matter of the loss mitigation manager being overworked. Banks have cut staff and asset managers are overwhelmed with offers and problems with the properties they are managing.
- If there is more than one lender to satisfy then the problem could be that either the 1st trust deed holder or the 2nd trust deed holder will not negotiate with each other on their short sale amounts.
- Loss mitigation managers will sometimes wait to see if any better offers are submitted on a property. From the asset managers perspective they want to recover as much as possible from that foreclosed loan. Remember: this is their job.
- If an offer is too low or if the borrower is asking for several incentives then the asset manager will just wait until a better offer is submitted.
Please feel free to call me with questions. I also have "New Bank Owned" homes available that are builder close-outs and are fast escrows!
Southwest Real Estate, Inc.
Jane Grant
866-621-0155
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