When will the foreclosure banks get real and reduce their selling prices on all their highly overpriced?

Asked by Artie Sanders, 33953 Wed Nov 28, 2007

financed properties they have had to take back?

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Paula Bean, , Orlando, FL
Thu Nov 29, 2007
AWESOME answers by all, but let me explain why most of the banks don't "get real" and reduce their prices on highlyy over priced properties.

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.
4 votes
Suzanne Walk…, Agent, Oklahoma City, OK
Wed Nov 28, 2007
Here goes my two cents and I'm passionate about this issue. I don't have the answer but I do have some thoughts:

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.

Susan Walker
4 votes
Myke Atwater, Agent, Santa Rosa Beach, FL
Wed Nov 28, 2007
If a property is bank owned, I would suggest making an offer of what you perceive as fair market value for the property, based on comparison market analysis by a knowledgeable realtor. You never know what they will accept, but the worst they can do is pass on your offer. But, of course, this is true in making an offer on any property in any circumstance. Understand, the banks are answerable to the feds as to how they have used bank funds--ultimately money belonging to the people who bank with them or stockholders, and are subject to certain federal banking rules and regulations.
Web Reference:  http://www.myketriebold.com
2 votes
Lisa Spencer,…, Agent, Lithia, FL
Wed Nov 28, 2007
I'm not sure any of us can answer that question, but you bring up a valuable point I constantly try to make with my clients...Foreclosures and Short Sales are not always ( I may even venture to say rarely) the best value on the market. There are plenty of Sellers out there with more flexibility to negotiate than a "bean counter" at the bank. The bank has stock holders to answer to and they are required to prove their sales are at "market value." There will always be a lag, as the banks are dependent on appraisers, who are dependent on "Comps." The comps will not go down until some brave and financially secure sellers sell their homes. There are always "deals" out there for those who work with an experienced Realtor with superior negotiating skills and market knowledge. I have been having a lot of fun with auctions right now... There was a huge on in Sarasota two weeks ago ... Impressive Deals! The link below will connect you to one that is coming up in Tampa. Keep an open mind and let a professional guide you : )
Web Reference:  http://ushomeauction.com/
2 votes
Bill Eckler, Agent, Venice, FL
Sun Jun 29, 2008
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"
1 vote
Perry Hender…, Agent, Austin, TX
Thu Nov 29, 2007
Foreclosure reality check.... Seasoned investors who buy foreclosures know the REO manager at the bank and get "off market" deals. They never have to bid or find a place to learn what's available.

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.
1 vote
Dr. Johnson, Both Buyer And Seller, South Florida, FL
Tue Sep 15, 2009
Please every one of these answers are BS. People have sat in their houses not paying the mortgage for 12 months or more.

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.
0 votes
Shannon Moore…, Agent, Port Charlotte, FL
Sun Jun 29, 2008
Hi Artie,

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.
0 votes
Suzanne Walk…, Agent, Oklahoma City, OK
Thu Nov 29, 2007
Thanks for insight. Maybe we need to be asking when will the the politicians 'get real' ????
0 votes
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