FORECLOSURES ATTRACTING MULTIPLE CONTRACTS
James R. Hagerty of The Wall Street Journal reports that housing markets in some areas including the Washington DC area are experiencing bidding wars as home buyers and investors compete for the bargains in the inventory of lender owned foreclosures. Real estate agents have found that multiple contracts have become a common occurrence in REO transactions.
A year or so back, the typical price reductions were in increments of $5,000 to $10,000. The lenders have gained more experience with property disposition and the reductions have become much larger. A home can go from fully priced to an under the market figure with a single price change. In in the Maryland suburbs it no longer a surprise to see a $100,000 price reduction.
Yes, many parts of the country are swamped with the inventory of foreclosures. However, in strong markets, the average time for a listing to be on the market is in the 90 day range and that is not a bad figure for a normal market. The moratoriums delayed some foreclosures actions and that delay may turn out to be good business for the lenders since they are now selling in a stronger market.
The more attractive lender owned properties are selling more quickly than the ones with deferred maintenance and repair requirements. Some of the lenders have discovered that spending some money on fix-up can result in much higher prices. Buyers have also gained more savvy. Many buyers are not using easy to obtain renovation financing such as the FHA 203(k) program that is available with a minimum cash requirement of 3.5% of the purchase price. The Streamlined 203(k) mortgage can be used to cover up to $35,000 of home improvements in the initial mortgage amount.
Bidding wars were common during the housing boom and many buyer agents have much experience in these negotiations. As the inventory of moderately priced homes is depleted, we may see even more multiple contracts. First time buyers need to get to settlement before the end of November to qualify for the currently available $8,000 tax credit. In hot markets, those first time buyers should be in the market now rather than later. The best selection is available now.
Many expect the national housing market to bottom out during the next couple of years. Some markets like the Washington DC are should recover more quickly than others. Individual owners tend to defer listing their homes for sale because of the competition from the lender owned properties.
So, what is happening with those low ball offers that many like to make? Many are left on the table since the prices have already been reduced to attractive levels. In this market, it is very important for home buyers to have an experienced buyer agent on their side. As the foreclosures are flushed out of the inventory, the market will be more attractive for individual sellers.
We represent buyer clients as their exclusive agents for purchasing homes in Montgomery County and Frederick County, Maryland. All prospective buyers should obtain advance pre-approval for mortgage financing since contracts need to conform with the planned financing. email@example.com