REOs & Short Sales: A Steal or a Deal?
I received a phone call yesterday from a buyer's agent who was calling on one of our bank-owned (REO) listings. The bank had just reduced the list price on this particular property by $15,000. We've had tons of traffic and gotten a handful of offers in the last few days. In the conversation, this agent asks, “What’s the home really worth?”
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“Well, the bank thinks it’s worth the list price.” I said.
After further conversation, I learned that she was representing an investor who was looking for properties to flip. Her buyer was hoping to pay about $50,000 below the list price so that a profit could be made at resale. “This may not be the home for your buyer unless the buyer is willing to pay the list price,” I commented (knowing full well that we had a few full price offers on the table).
She grumbled and hung up. I feel sorry for her; she’s got a tough job.
A market full of short sales and REOs doesn’t always mean a steal or a deal for the buyer. With respect the REOs (especially those for which traditional and FHA financing can be obtained), banks are expecting to receive offers close to market value.
With respect to short sales, it’s pretty much the same. Yes, the property owner is in ‘distress’. Yes, the bank wants money fast. That being said, banks are generally unwilling to sell a short sale for a song. Government programs such as HAFA (Home Affordable Foreclosure Alternatives) designate a pre-approved purchase price for short sales and that price lasts for 120 days. So, getting a steal (or a deal) on a HAFA short sale is going to be next to impossible.
In Southern California, we’ve been seeing lots more aggressive foreclosures than before. But, the pool of available homes for sale has not been increasing proportionately. So, there must be one heck of a shadow inventory. When that shadow inventory is unleashed on mankind, perhaps the tables will turn and the banks will be more open to lower offers.
What say you?