If you having been making offers on foreclosed properties lately, you probably already know that competition among buyers here is South Florida has been getting intense over the course of the last four to six months. This is especially true for properties valued under $200,000.
I have have listed a number of bank owned properties this year. Also known as REOs (for Real Estate Owned). Since about April every single one of them priced under $200,000, have had multiple offers and many have been bid up well over the asking price. I had one listing in a desirable neighborhood of Deerfield Beach with an asking price of $145,000. It had 36 showings in the first 24 hours it was one the market. Cars literally clogged the road in front of it the first day. My phone rang off the hook. It had a half dozen offers and sold for cash above asking price in two days. That was in June and since then the number of REOs on the market has shrunk compared to the total number on the market. More recently, I had a bank owned condo that was listed for $48,900, sell for $58,000. Thats 19% over asking price.
I have been working with one investor who has purchased more than ten properties from me this year most of them in the same neighborhood. However, we have not had the best offer at least half the time. An associate of mine has made offers on behalf of one of his buyers for nine different properties and lost each time. Once when offering 25% over asking price!
On those same examples above I also recieved offers that were 30% and more below asking price. Clearly many of todays buyers are just out of touch with what is really going on in todays market. We are in a situation where the market is over-sold. Prices have retreated from 50% to 75% from the top of the market. Savvy investors see the opportunities out there and are making aggresive offers for cash. They are also competing with first time buyers looking for a home that may never be more affordable.
If you are attempting to purchase an REO in South Florida you are by no means alone. Be prepared to be dissapointed when you aren't the top bidder. I suggest if you are attempting to buy a foreclosure these days that you submit your highest and best offer from the very beginning. Find out what comparable properties have sold for recently and perhaps add to that whatever is within your comfort level. If you are a first time buyer be aware that you are competing with investors. Generally the banks don't favor a cash offer over a financed deal if they are the same amount, but they want to know that the borrower is fully qualified. Your pre-approval letter should state that your income, employment and credit scores have all been verified.
I have been hearing for months now that more foreclosures are on the way. No one has any way of knowing where prices will be in six to twelve months including myself. There is a lot of idle cash out there and we are at a point now where the numbers make a lot of sense to investors. I always felt that was where the eventual bottom would be. Lets hope I'm right.
Tom Day, Remax in Motion