I read an article on active rain yesterday from an agent that specialized in bank owned properties. His basic attitude was don't submit a low offer and don't put down why you put in a low offer because of the problems with the house. He stated he knew what was wrong with the house.
Unfortunately I think banks are disconnected with how bad some properties are and if that is not included in the offer then they (the bank) have no clue. As the agent said the banks are making a decision strictly on the numbers. It is OK some of the time to make the decision on the numbers. But in Detroit's market the banks are realizing they can't do that. If the bank owned property is in substandard shape then a buyer should be making a low ball offer.
I'm sure I am going to ruffle some feathers here. I know as a real estate agent some agents would rather get and work on an offer that is close to the list price. There is a small percentage of agents that would rather just buy or sell without getting the best possible deal for their client. That small percentage of agents want to just make the sale! Less negotiation, less trouble, quicker money in their pocket. But in the Detroit market the prices are continuing to fall. You are not acting in the best interest of your buyer if you are not putting in a 10 - 15% below list price, if your client is shopping for a deal. It doesn't matter what the comps are now. By summer the price is going to be lower because of the the bank owned properties. The banks have to move the inventory. So they have to lower the price. We do not have enough qualified buyers in Metro Detroit to support the market. But if your client has to have the house, and no other house will do then a low ball offer is not the best tactic. Put in a lower offer that will still clinch the deal and hopefully will be lower than the most recent sold comps.
I have seen sold deals where the bank listed price was $71,000 and sold for the low $40's. Another 2 were listed in the $40's and sold for $5,000. Some banks have sent out emails to the REO's that they were more willing to accept those offers because they had to move the inventory.
The bottom line in Wayne County Real Estate, Livingston County Real Estate, Oakland County Real estate, and Metro Detroit Real Estate is that low offers are being accepted. I agree not all the time and I agree that it would be easier to submit an offer closer to the list price to get the deal done. But as agents we are supposed to be acting in the best interest of our buyers. Sure I can't 100% for sure predict that home prices are going to continue to drop this year in the Metro Detroit market. But I would bet money on it, so if I think that I need to go against common practices and put those low ball offers in.
If you want to Search Michigan Homes for sale or want more information on Metro Detroit real estate go to my website www.russravary.com
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Russ Ravary your Metro Detroit realtor
Hello Russ,
Welcome to active rain, it's a great online community, Enjoy!
Leo Namiot
Benchmark Mortgage
Connecticut Mortgage Specialist
www.LeoLends.com
Hi Russ,
Your experience proves out the phrase "all markets are Local" once again. I am an REO listing agent in southern California and my REO experience seems to be the exact opposite of what you are experiencing. One example is a current listing I have. This home started out priced at $329,900 and in the first week I had an offer for $300,000. The bank promptly countered back with full price! Since that offer I have had six offers, anywhere from $250,000 cash from an investor to $285,000 from a first time buyer couple. They have all been countered and rejected. I currently have multiple offers on this property (did I mention it has been on the market now for 100 days?), both of which are being countered. The current list price is $304900. The better of the two offers came in at $300,000 and the buyer is asking for 3% closing and 3% DPA through H.A.R.T. They were promptly countered back with an asking price of $305,000! Out here,at least some of the asset managers that I deal with, are super tight. They are just simply not going to "give away the farm". I could go on for weeks with things I see happening in the market out here. As far as the banks not really knowing the condition of the property; they have a pretty fair Idea even though they have never been at the property. The BPO's I do for them are very extensive. We're talking 20 photos both interior and exterior, the property inspection takes me through the property room by room. I have to get estimates from contractors for repairs and come up with an estimate of value including a "cost to cure" number. All of this information is based on CURRENT MARKET CONDITIONS.
Rudy
Rudy,
Since I wrote the post, Metro Detroit real estate has gotten"warmer" REO's are selling now. Many banks are pricing them to sell.
Hi Russ,
Yes I agree REO's are moving as well as any other type of sale, especially short sales. It will be interesting to see how it all plays out. I know about a year or so ago our company trainer was telling us agents to stay away from short sales. Now we are all being educated on short sale success strategies. There are many agents who still will not get involved with a short sale. This attitude, the way I see it, will only increase the nubmer of REO's out there thus reducing property values even more.
Rudy
What an eye openener that there are all kinds of different markets operating at the same time.
Hi Russ,
I agree with what you're saying all around...I owe it to my buyer to submit any price they wish to offer. With that I offer I'm going to use evidence to back their offer. Yes, they (the lender) may know that the house isn't in the best of condition, but they may be unaware of the fact that now there is mold, rodents, stench from being closed up for a year, broken windows from vandalism, etc.
No one should be paying market value for these properties not if their agents are doing their job. With enough low offers the banks will realize that they need to lower the price...especially among these market conditions.
The areas where these properties are selling like hot cakes to speculative investors for market value or 80/90% FMV will most likely be back on the market in no time, as another bank owned property. The best is yet to come.
I urge my buyers to buyer will the market correction built in, or wait.
Thanks for the article!
Tara
I am a review appraiser for a large bank and as you all have valid concerns, trust me in saying we do not want to keep the real estate. If we can gid rid of it and still face our investors than we let it go. We try and value it (loss mits, REOs, short sales) at current market and even add some decline based on the time it takes to get it to market. Now from our side, you must understand that we see as much BPO fraud and loss mit fraud as you see tight banks. Not all Real Estate Agents are like yourself. Trust me on that one. It is hitting the happy medium and meeting in the middle. Advice: try and get a realtionship going with your bank or lenders Loss Mit department or REO specialist so that they know that they can trust you as well......
I and my business partner list and sell REO's in NW Ohio. Sometimes I get a little tired of hearing what's wrong with the property. When we do the BPOs for these properties we have to list and estimate repairs for the property and comment to the seller why our BPO came in at the price that we recommend to them. When we get other agents and buyers trying to justify taking more off the price because of those same repairs we are already aware of, (and so is the seller) it just get's tiring.
The market is what the market is.... Sometimes, when we put a recommended price on the BPO the seller still comes in with a higher price than we want. In those cases, we welcome all the low offers we can get to show the seller what the market is going to pay. We as professional agents KNOW that we don't make the sale price of a property ourselves, but the price will be determined by what someone will pay for the property. When those low offers come in, it helps us to justify why our BPO recommended price should be considered.
And finally, the fact is that the seller will continually lower the price of the property until it sells so eventually it will get to where we will end up with multiple offers! REO's are pretty much a guaranteed sale but many times it just takes some patience. At least they end up selling eventually....