Foreclosures - There are No Other Bidders! Bid What You Want!

By
Real Estate Agent with Crye-Leike REALTORS® 165062
Many of the folks in real estate these days do not know how to play chicken!  This is especially true of foreclosed homes.  When they put another offer in on a foreclosed home, they are told "We have other offers!"  But do they?  How do you know the bank does have other offers?  Will they give you a cover sheet first page of a contract?  Will they put it in writing on bank stationary?  What would they do if your buyer automatically instructed you to revoke your offer if there is one on the table?  How would the other agent respond?  The game is...how well do they play poker, and how naive are you?   There was a major lawsuit in California years ago where a buyer placed an offer with his agent, and they advised...we have another offer...and the buyer bid the price up...and they mentioned the offer was countered, and he was # 2.  So he bid up his offer and won the home.  He found out later...there was no other buyer.  He sued and won.  There is a sucker born every minute, and in real estate we have more than our fair share of agents and new agents whose ego prevents them from thinking this through to the next level! 

The bank does not want to lose any money on their assets, but they are losing their asses if everyone comes in with a low bid on a home they have valued at a greater price.  So the easiest way to drive the price up is to create an auction mentality.  In the real world you would have other bidders, in this world...there aren't any!  The numbers of closed sales in many markets tell you that.  All you have to know is your market statistics.  In the Atlanta market sales are off between 40-45%.  There are less buyers because there is no credit!  OK...next item...unless you have cash, you are probably not going to get reasonable financing for investor owned property!  Lastly, if this is your own personal residence...you may be in good shape!  Do not believe everything you are told!  Basic rule in real estate...is have them place it in writing that you are advised there are other offers on the table.  They won't!

Most bank owned properties today, and foreclosures are doing this because no one ever challenges them.  They get away steam rolling an agent that has never seen a bad market.  An agent whose ego will prevent them from asking questions to others that have real experience!  So they move foreward into a deal, and pass the DANGER SIGNS!  Even if there were other offers, they are all probably as bad as yours.  The secret to negotiating a foreclosure is to have your financing or cash in place, no special stipulations, and close it fast for a ridiculous price!  Why?  Because there are no other buyers right now!

Jim Crawford

 

 

 

 

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James Crawford ABR, Broker Associate

 

 

 

 

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Jim Crawford
Crye-Leike REALTORS® - Atlanta, GA
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C. KIM McGuire  Kim...Smart!  Emotions get in the way!
Feb 22, 2008 02:28 PM #26
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Mirela Monte
Buyers' Choice Realty - North Myrtle Beach, SC
Myrtle Beach Real Estate

I guess I was made for this type of thing, because I don't ever hear "No!"; to me it just sounds like "Maybe", and I always forge ahead playing the 50/50 odds... 

Emotion has no place in negotiations, and savvy agents and investors know that.   In 2005 it was sheer madness at the beach, with properties going on the market and receiving 3,4, 5 offers within 24 hours.  I was vigilant, wrote a clean contract and almost always got the property.  In this market, "we have another offer" is a bluff that has lost it's luster...  With only 2-3% of our properties selling every month, I know where the price needs to be in order to garner any attention...

50/50 odds are great...  be undeterred, bad market or good...  next, next, next...  it's a numbers game...

Thank you for a good post!

Feb 22, 2008 04:28 PM #27
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Jim Crawford
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Your Myrtle Beach Connection Mirela "m&m" Monte  I know the odds are better than that!  70/30 in the buyers favor at this point right now!   Think of it this way...in the heat of the market everyone flocked to buy...the bait was we have other offers.   So now when the best buy is presumed to be a foreclosure what are they saying?  "We have other offers!"  Most agents are too stupid and naive to see this!  They do not want to ask anyone (ego) because they may look stupid!  It's never foolish or stupid to ask lots of questions.   Humility is a great base to learn from.  You are right on the money!

Feb 23, 2008 01:52 AM #28
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Ed DeChristopher
Fredericksburg Realty, Inc. - Fredericksburg, VA
CRS Fredericksburg VA

Have worked with a gentleman here in Fredericksburg Virginia for more than 15 years.  He builds homes and commercial buildings.  Is young and bright.  Has degree in business.  Is savvy investor.  Liquidated homes he owned (LLC properties) and also liquidated homes he owned with his brother (an equally savvy investor).

Just decided to get back into investment homes.  Has made several offers in past few days.  Cash offers.  Close end of March (am going to recommend we close in 2 weeks on any further offers).  You would love to see some of the responses!  "You did not submit a lender letter."  Of course we didn't, it was a cash sale!  "I will present this  but just as a heads up, we had much higher offers on this that the bank rejected and didn't even counter, but I will see what I can do."  The home has been on the market for 184 days!  Have they figured out yet that the market is rejecting it at their price?

Folks, this situation is going to get worse before it gets better!

Feb 23, 2008 03:09 AM #29
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Ed DeChristopher, CRS©,Fredericksburg VA  Even the lenders do not know what to do in this market,  They have given their listings to agents wiht little or no experience that do not understand real estate.  The banks do not understand the urgency of a good offer, and in the mean time they are trying to BS their way to a sale!  It doesn't work that way!  Thanks for sharing Ed!

Feb 23, 2008 08:25 AM #30
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Kelsie Compton
Triangle Choice Realty, Inc. - Cary, NC
Cary NC Real Estate

Jim - Great article and great timing!  I believe we are going to see more opportunities (for buyers and investors) this year.

Best Wishes,

Kelsie
www.TriangleChoiceRealty.com
www.TriangleBuyerAgent.com

Feb 23, 2008 11:19 AM #31
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 Kelsie Compton  Great opportunities will exist for those that can see them as the really are!  Thanks!
Feb 23, 2008 11:32 AM #32
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Tina Maraj
RE/MAX Cornerstone - Fullerton, CA
Top Agent in Fullerton 2016-2018 714-403-7901
Great points Jim, but in Southern California's home buyers are swarming on foreclosures, even if they are not good deals.
Feb 23, 2008 02:04 PM #33
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Tina Maraj Shah Realtor  Not smart!  They need to ask a lot of questions first!  "Fools rush in where angels dare not tread!"
Feb 23, 2008 03:58 PM #34
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Esko Kiuru
Bethesda, MD

Jim,

Looks like banks are doing everything they can to unload REOs, including using this little play. And they are probably getting away with it most of the time, without anyone calling their bluff. Or suing afterwards, like the buyer in California did.

Feb 23, 2008 04:41 PM #35
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 Esko Kiuru - Las Vegas NV Mortgage Consultant  Maybe it is good we get the word out!
Feb 23, 2008 04:50 PM #36
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

"We've got another offer coming in". 

I've heard this so many times over the years, I now warn my buyers to expect that comment when we call about a listing. 

Listing agents are taught at childhood to say "We've got another offer coming in".

I recall one time when a listing agent told me that and my buyer's decided to write on another property becasue they didn't want to get in a bidding war.

Next day, the agent called. "Where's your contract?"  I told her they wrote on another because they didn't want to bid.  "Oh that was just another agent in the office who had shown the house and said her buyers liked it an might write". 

I think that agent learned a valuable lesson that day.  Don't try to negotiate until you have something in hand.  Don't try to create traffic when there is none.  And, don't lie to Lenn.

 

Feb 23, 2008 11:48 PM #37
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Robert Martinez
Blue River Holdings, Inc. - Lilburn, GA
Gwinnett County Real Estate Investor

Jim

As a real estate investor, I'm seeing a lot of what your relaying in your blog.  Credit markets are tightening and the banks are just "plain and simple" getting out of a lot of markets.  And, it seems like the lenders are falling by the way side almost every week. 

One crazy thing that I'm running into is the re-finance bank's questioning of hugh increases in value after a rehab.  Its crazy because, its the very banking community that is giving away these houses at great discounts on the front end.  Its a classic case of the right hand (lending group) not talking or understanding the left hand (reo group). 

But, in all of this, it remains what I say may be the best buyers market in our lifetime.  Its the perfect storm...low interest rates and hugh inventory levels.

Feb 24, 2008 01:05 AM #38
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Robert Martinez / Gwinnett County Real Estate Investor  Very well said!  It's a "Perfect Storm"  but we have to be very cautious...this market also has great risks around every corner.  It is exactly the way you shared it.

Feb 24, 2008 01:31 AM #39
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Homefinders, Real Estate in MD & VA, Lenn Harley, Broker, New & Resale Homes  Lenn...so true.  I had a seller years ago that would not leave the home when showing.  He made the fatal mistake of telling other agents and buyers "The offers are rolling in!"  What he did not know is that most folks do not share that competitive edge.  They refuse to get involved.  The banks these days are in a real disadvantage because there are 50% less buyers and they are BS'ing them away!

Feb 24, 2008 01:37 AM #40
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Karen Kruschka
RE/MAX Executives - Woodbridge, VA
- "My Experience Isn't Expensive - It's PRICELESS"
Jim,  With 31 years in the business the last thing I listen to is listing agent hype, especially when a home has been on the market 6 or more months and "another contract is comung in" just when I write mine.  I am half tempted to suggest my client will wait to see the outcome of the other contract.
Feb 24, 2008 02:16 AM #41
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Chad Baird
Re/Max Spirit - Dayton, OH

I have clients who tell me this is our max, bid accordingly.  I've found many of the multiple bid situations are hard to believe.  We've stayed firm on our bid and still win.  He had one that they were on the fence on.  We decided to float a low offer just to get the ball rolling.  The same day we were told 3 other offers came in and to submit highest and best.  I said to keep us where we were at, we did not like the property much anyways.  We bid, got countered, and recieved the Addm's all on the same day! 

I know there was no other bidders on that property.  Asset Managers are not that fast, they wanted to dump that property ASAP.  Using that tactic almost made my client withdraw his bid.  He almost rejected the Addm's and he was still on the fence, but he went though with it because of the crazy price he won it for. 

 

Feb 24, 2008 02:33 AM #42
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Karen Kruschka - One of the most experienced agents in Northern Virginia  I personally believe that is the best strategy!  That if they say they have another contract, our offer is VOID!  Also here is another very very important tip!  Most listing agents for REOS offer a low commission to Bank  the reason they BS everyone and do not return calls is that they want to double dip!    We need to think through every scenario!

Feb 24, 2008 03:09 AM #43
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Chad Baird   I think it is a rare situation right now.  It could change, but I do not see that in the short term.  No credit, 50% less buyers...like I said it is a game of "Chicken!"

Feb 24, 2008 03:15 AM #44
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Chris Catanese  Thanks for shairng.  I'd love to hear how it turns out.  The banks need the sales, they have no liquidity!
Feb 29, 2008 07:06 AM #46
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