Today I found myself wondering, " Are my bank clients best served the blind ‘highest and best' system?" I am just a small REO broker and I have two amazing bank clients. But both banks are thoroughly convinced of the effectiveness of the multiple offer disclosure and blind highest bid in a multiple offer scenario.
The funny part is that, when a home is not bringing the desired result on the open market with this system, both of my clients allow properties to be turned over to the auction process! I would almost prefer it if I could get one good last price reduction in with an MLS note that offers will be held for 7 days. I could do the same newspaper advertising and two open houses during the 7 day period as the auction companies, the internet presence is already stronger through the foreclosure websites that the bank subscribes to than it is with the auction companies. There is no reason why banks could not hold their own, free, ad hoc auction with a reserve. No offer is final until the investor approves it and the buyers could be in the know-given the option to outbid each other. Is this crazy talk?
I am just waxing philosophic about it today because buyers in Northern Nevada seem uncomfortable with the auction process. The learning curve is arduous on the agent end because buyers with $20,000 in the bank request showings on advertised auction properties in anticipation of purchasing a home valued at $250,000 for $15,000 cash. They are also unfamiliar with the buyer premium involved with auction purchases.
Another concern is appraisal in our dramatically declining market. In the event that the heat of the auction process drives the property to market value (yay!), by the time a contract is executed and submitted to underwriting and an appraisal is ordered, three weeks may have passed and the property may have decreased in value as much as 2.5% during that time frame. If the home was contracted at market value plus the 5% buyer's premium then decreases 2.5%, the property will not appraise. I wish that this concern wasn't our recent reality, but it is.
Does anybody out there in the great Active Rain Abyss have a hand out or advertisement that helps buyers better understand the auction process in an area where this concept is unfamiliar? Even better, some bank insight as to why auctions rock and I have my head in the sand?
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