It has to do with legalities mostly, and money secondarily. It costs a bank somewhere between $35K to over $100K to foreclose. This includes hiring the overpriced atty to do the paperwork, file courthouse papers, pay the taxes and insurance on their collateral, and when it's all said and done, they foreclose. NOW... they have to put it for sale with an agent, pay the agent and still carry the costs of the taxes, insurance, etc.
In addition to that, this is what the Feds call a "non performing asset". The Feds have rules about that. If you have a certain percentage of NPA, they will not loan the bank any more money to make loans to people, and THIS is where the banks make their money.
In addition to THAT, IF the bank sells the property for less than market value, they must give the overage back to the foreclosed upon seller. So they have to make sure they've tried long and hard enough to prove they couldn't get the price before taking on the liability of making it look like they snaked the seller.
So... when it is all said and done, the banks really want to dump these properties asap, but the laws, regulation and government stand in the way.
Hope this enlightens all to the realities of the foreclosure market, and as has been said here already, a great agent can negotiate a great deal for you, and that may not very well be a foreclosure - although the media is hyping it up and making it look like they are just 'giving properties away' for pennies on the dollar, and that doesn't help either.
I told a client (builder/investor) of mine recently, 'that a few years back someone introduced the banks to the concept of fair market value' and he replied, 'yeah, you Realtors did.' We laughed but this isn't funny.
Banks need to wake up because they might just be contributing further to this whole mess we're in. I'm watching banks hold onto properties for 9-12 months that I could have told you from day 1 were overpriced suddenly slashing prices. I've seen foreclosures not reduce price in the first four months. Come on guys, you don't get an offer in 4 months at asking price or within $10k. It's overpriced and not just by 5% (this seems to be a magic number when they do reduce).
I think this effects the market negatively. It scares people when a bank dumps a $150,000 property, originally priced at $165,000 for $86,000 after 1 year of no offers. Why not just price it at $150,000 and sell for $130,000 (worse case) in the first 3 months? Buyers aren't stupid they won't overpay and it just waste agents time.
Anybody who has been in real estate a long time knows this isn't the best selling strategy for markets already suffering. Just price it right from the get go and don't depreciate values further when 1 year later the stock holders are screaming.
I'm always complaining the banks want fair market value when selling as is where is?!?!? They want someone to accept all the risks and earn nothing for it. And, then someone watches some late night infomercial and it validates the banks ego. (what I am referring to is the unknowing consumer assuming because it is a foreclosure it is good deal)
The day will come foreclosures will be a good deal again, and only the smart buyers now will be able to capitalize on it then. On the whole I couldn't agree more that 95% of the foreclosures I've seen in the latest real estate 'bubble' were and are overpriced.
Lisa is 110% right a good negotiator can get you a great deal regardless of who the seller is.
The time is getting close......as short sales do not sell and foreclosure inventory builds there will be a much needed downward movement of these prices......People are looking at the volume of short sales and their poin in time....it looks like this Fall will be the time we see movement.
The "Eckler Team"
FOR ALL OTHERS: The only "sellers market" in america is the foreclosure market. Don't expect any deals from a foreclosure as the bidding process brings 20-30 people to bid on almost every deal. A deal that was already priced at market.
It's easier to get a deal by going to a realtor, asking them to find the oldest property on the market and start dropping discounted offers. In addition, you won't have to wait 30-60 days to hear an answer.
We are seeing over 300,000 notice of defaults a month. The fed doesn't want the inventory to hit the market because then everyone will be underwater as huge inventory floods the market, they will then walk and we have a landslide.
The banks could care less as long as they are getting Fed and TAXPAYER money.They have no incentage to sell, as they would then have to mark to market their loans (which are worth about 30 cents on the dollar). Then the FDIC would have to close them down because they are insolvent.
This entire system s rigged along with the low rates to help all you idiots that bought houses you couldn't afford over the last 5 years. And 90% of realtors contributed to the mess. What a useless bunch of overpaid salespeople.
Soon, the dam will break. The prime mortgages and option pays are all now resetting, so look for another cash in re prices in late 2010.
Inventory is artificially low now, don't believe realtors, they all lie. Read a blog like doctorhousingbubble dot com.
It looks like you posted this a few months ago. The prices have come down considerably since you posted this. We would be happy to send you some listings that fit your criteria.