1. Seller sees he is getting into trouble and lists his home (usually too high) to try and pay off the bank and get some moving money. And the home does not sell, so......
2. Seller defaults on his loan and is now serious about getting out from under the home, so he reduces his price (usually not enough) and tries to sell again. And the home does not sell, so.....
3. Then 90-180 days after he defaults, the bank files a notice of default (NOD) and seller drops his price again. Now he is in a 111 day foreclosure cycle, but still not willing to do a short sale, and the home does not sell, so.....
4. The seller gets close to the end of the NOD period or may even waits until the Notice of Trustee sale is recorded, panics and decides to do a short sale. He lowers the price way down, after all now he is not going to get anything anyway, and gets an offer submitted to the bank for short sale. If the bank is willing to consider this offer, it will usually postpone the Trustee sale while it reviews the package, which could take 60 - 120 days. If the bank denies the short sale, then.....
5. The bank forecloses on the property and it becomes an REO. Many REOs take 30, 60 even 90 days to get on the market (the banks are really backlogged and have procedures they need to follow) and then the property is re-listed by the bank's realtor as an REO. In our MLS, the property has to be off the market 90 days (I have heard rumblings they are going to increase this, but I am not sure if they have), however in this scenario lets assume that the bank make it on the market in 75 days, so the CDOM keeps counting.
Here is the math: 60 days + 90 days + 90 days + 60 days + 21 days + 75 days = 396 days CDOM on the first day of the REO listing. A good realtor can give you the history of what has happened in this time period, but the most important question is, WHAT IS THE RIGHT PRICE FOR THE HOME TODAY?
To get that answer, and to negotiate the best deal possible, you need to work with a great Realtor who knows your area. I don't, so I can't give you the information you need. I do, however, know a great agent with over 20 years experience in your area and I would highly recommend, if you are serious about buying, that you speak with her. She is a top level negotiator and knows Danville like the back of her hand. Let me know if you would like her name and contact information.
Keep looking and I am sure you will find a great home, at a great price and negotiate a great deal. And Dare to Dream.
Real Estate Consultant
RE/MAX Palos Verdes Realty
One of my co-workers was following up on a short sale with B of A . She has been working with the lender for the past 3 months and thought things were going well. The appraisal was completed and came in at the contract price. Nevertheless, when she called to get an update, she received a recorded message that said the short sale had been cancelled. When she finally went through the 'phone tree' and got a live person on the phone, she was told that a new person assigned to the case decided the 'price was insufficient' and cancelled the transaction. There are Three important lessons here: First, this lady is a great real estate agent and was staying on top of the transaction. If she hadn't been so diligent in her efforts, none of the parties involved would have been notified that the transaction was cancelled. The buyer would have been waiting and waiting and waiting--all for nothing. The seller would have been caught unaware that he was getting closer to foreclosure because the sale was cancelled. The second lesson is that things can change very quickly and unexpectedly in a short sale. There are no guarantees you will close the escrow. And third, short sales are not necessarily the great bargains people think they are.
With a bank-owned property, you are buying directly from the bank. The bank wants to maximize it's return and may use different approaches to reach their goal. One approach is to test the market (much like many sellers) and start with high list price for a couple of weeks to see if they get any interest. Often they will decline an offer that comes in more than 5% under their asking price. If they don't receive any offers within a certain amount of time, they will reduce their price and begin the process again, until they get an offer within 5% of their asking price. And yes, sometimes they wind up turning down an offer in the beginning and selling for less later on. Often times, it doesn't make sense, but it is the formula they use and they stick with it.
Some banks use the 'silent auction' approach. That means they list a property at an EXTREMELY attractive price and let buyers create a bidding war. The property then sells for way over asking price. In either case, the price of these properties may be slightly below market to justify the risks involved in buying a property without any disclosures or recourse against the seller.
I didn't mean to write a book, but there is so much confusion out there that I felt it needed clarification. Ofcourse, there is so much more to discuss. I am sure others will add their 2 cents worth.
Have you found that San Ramon/Danville home at 60% off the list price yet? On the very local level I service (San Ramon/Danville/Blackhawk/Alamo/Diablo) market sales have significantly improved in July and August. Buyers are out there and sellers are receptive to offers. Price reductions of 10 to 15 percent are not unusual. Short sales and REO's are also moving as lenders start understanding how to handle this unusual market. The federal bailout of Fannie and Freddie is also improving lending rates. This is a dynamic market as buyers, sellers and lenders start working with each other to get homes sold. I would encourage anyone looking in premiere locations to contact me or your Realtor to get a full understanding of where we are right now and what options are available right now in your favorite areas. Please don't expect the 60 percent reductions ...... those homes SOLD at a 20 - 25 percent discount but, hey, that's a great price in this ever-changing market. I hope this paints a realistic picture in this exceptional Buyer's Market.
Let's go home hunting!
An REO is much more clear, most REOs in the Danville that are in this price range move quickly as they are typically priced very competitively compared to like properties in the same neighborhood. An REO that doesn't move quickly has a serious problem with the price/value relationship. Good luck! Do not fear the short sale, there may indeed be extraordinary value there.
It can really depend. The banks are motivated to sell the inventory, but at the same time they are looking to ensure that they can recoup as much as they can. When presenting and offer, any offer, having a list of comparables and well as a letter indicating why you are offering below asking (does the property need work?) will be a good idea to help support your offer price.
Until there is something in writing, nothing can be negotiated. I would suggest you work with your Realtor to put together the offer, your reasoning for the offer price and see what happens.
Alain Pinel Realtors
Thanks again. You'll probably see more of my inane questions in the near future. :)