Home Buying in Natomas Park>Question Details

Looking4value, Home Buyer in Natomas Park, Sacram...

To Anna Boyd - are u sayihg 1770 baines is a REO or are u talking about 1800 baines? Also, how long before u can approach bank re REO?

Asked by Looking4value, Natomas Park, Sacramento, CA Sat Aug 14, 2010

Which - 1770 BAines or 1800 Baines- is a REO? If Bank acquires for 329k (on paper) why would comps of 400k make a difference? Doesn't bank want to unload property asap? Thanks.

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Ute Ferdig - Atty. Negotiator’s answer
Looking4value. Just in case Anna does not see this post. 1770 Baines is not bank owned. It appears owner just refinanced in May and there is no indication that the property will come on the market any time soon. The same owners have owned 1770 Baines since 2002 and the fact that it sold for $441,500 in 2002 is not relevant to the discussion of current value.

1800 Baines, a property with the same square footage, is bank owned. Chase took it back in May of this year. While they took it back at $329,000, that does not mean that they'll put it on the market for well below current market value as doing so can hurt the bank down the road if they take back another house in that neighborhood. If they dilute values in the neighborhood by selling too cheap, they not only hurt the community, but also their own chance to sell other homes at or near fair market value. Obviously, the market value of a bank owned property is already somewhat discounted just because it's an REO. The other reason why they at least try initially to get fair market value is because many owners who lost their homes to foreclosure are still responsible for the junior loans they took out after they purchased as the foreclosure by the first only wipes out the junior lenders' security interest, but it does not eliminate the underlying loan. When the first takes the property back and sells it for more than what was owed to the first (loan plus cost of foreclosure), the difference of the sales proceeds and what was owed to the first should be paid to the holder of the junior note, which will then reduce the liability of the borrower. I hope this explains why comparable sales data are relevant even if the bank took the property for less than what comparable properties are going for in that neighborhood.

Ute Ferdig
Ferdig Real Estate Solutions
0 votes Thank Flag Link Sat Aug 14, 2010
Ute Ferdig -…, Real Estate Pro in New Castle, DE
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