Banks Have the REO Market Locked Up

By Daren Blomquist

Jay Schurman concluded that “banks are not in the real estate business” after a marathon REO purchase in 2008 that started in January and ended in August.

“While it was frustrating to have to wait for the bank to list the property — we would have offered the same amount in February that we ended up buying the property for in August — it was worth the wait,” he said soon after the purchase.

Nearly two years later lenders are much savvier about selling bank-owned properties, and their newfound know-how is grounded in the basics of supply and demand, which are both heavily impacted by foreclosures in the 2010 marketplace. Sales of properties in some stage of foreclosure accounted for one-third of all sales in the first three months of the year, according to RealtyTrac.

Driving Demand

Lenders have become more willing to set REO asking prices well below peak market values, helping to ramp up demand from first-time homebuyers and investors.

“We’re seeing significant discounts – sometimes as much as 50 to 60 percent off the properties’ previous high value,” wrote Robert Friedman, chairman of auction company REDC, in an e-mail.

The lower pricing strategy and resulting ramp-up in demand is ultimately better for lenders’ bottom lines, helping them move properties quickly and mitigate their losses, according to Tom Driver, director of operations for Keystone Asset Management, a Lansdale, Pa., company that provides REO asset management services to lenders.

“The practice of testing the market and adjusting after 30 or 60 days is no longer employed as banks realize that overpricing their assets only leads to longer days on market and greater losses,” he wrote in an e-mail.

Short Supply

Aggressive pricing and an “artificial shortage” of bank-owned properties in Las Vegas have created a buying frenzy there not unlike what occurred in the boom market, albeit with prices as much as 70 percent below the peak, according to REO listing agent Bryan Pellican.

“We’re getting multiple offers on almost all our listings … Buyers have been offering above-list for the last two months, and cash offers,” Pellican said.

But Pellican sees the current market as a “false bottom” that lenders and government-sponsored foreclosure prevention programs are helping to create by delaying the influx of new REO properties on the market.

“I think what they’re doing is that they’re trying to regulate the flow,” he said. “Which I think is going to prolong how long it’s going to take to recover, but it might feel like less of an impact.”

And lenders are increasingly leasing REOs instead of listing them, according to Michelle Mangione, who with her husband owns a property management company called Blue Real Estate Services in coastal Orange County, Calif. The company runs a Hold For Rent (HFR) program that evaluates, repairs, leases and manages REO properties for mortgage servicing companies and private investors.

7 Tips for Buying REO Properties

With the number of bank-owned REO properties expected to rise significantly in the coming months, we’re offering you 7 Tips that can help you more easily and more quickly snag a bank-owned property.

1. Hire an REO expert with experience buying bank-owned properties in your local market. RealtyTrac has thousands of agents to choose from in our RealtyTrac Agent Network.
2. Avoid lowball offers. Since most bank-owned properties are being sold at list price or above, a lowball offer will not work at current market conditions. Write an offer slightly above list price.
3. Determine the value of the property. You make your money when you buy, not when you sell. ReatyTrac’s Trend Center can help you become an expert in your market so you can recognize a bargain instantly when you see it. Also have an inspector and contractor evaluate the property and itemize all the repairs that need to be made. Subtract the cost of these repairs from the estimated value.
4. Submit a complete package. Each lender has certain guidelines for submitting offers. Send a proof of funds letter, a bank account balance statement and a pre-qualification letter from your lender if you are using conventional financing.
5. Write multiple offers. Don’t expect your first REO offer to be accepted. Competition is fierce. Be prepared to write multiple offers on different properties before you land one.
6. Prepare for counteroffers. Banks will often send you a counteroffer at a higher price. You may be willing to raise your price slightly with the first counteroffer, but if a second counteroffer comes in, respond with your “best and final” offer, reminding the selling agent that you are only buying one REO property.
7. Be prepared to walk away. If the bank doesn’t accept your offer or you’re unwilling to raise the price during the counteroffer period, be prepared to walk away and find another deal.

MY COMMENTS:

I have been saying this for Months. The banks don’t want to flood the market with foreclosures & have another scare like in 2007 & 2008. The banks are leaking the properties out one at a time at way below market value & when they hit the market so low there is a feeding frenzy which results in both multiple offers (sometimes up to 8 to 10 offers) & properties pending fast so they no longer show up as active listings. The multiple counter offers of “Highest & Best” drives the price back up to Market Value or even above. What looks like a killer deal at $68,000 ends up selling for 10, 20 or even 30 thousand more than asking price.

Since there aren’t that many active foreclosure listings showing at any given time it  gives a false security to the buyers that we’re running low on the foreclosure market because when your Realtor looks up active foreclosures there aren’t that  many. They go pending so quickly but trust me there’s still plenty of foreclosures out there, they are just marketing them differently.

Got to love February 2010 as the Bullhead City Arizona real estate market continues to move in the right direction for recovery.  Very exciting news is that the median sales price jumped up to $125,100 from a low of $102,000 in January 2010 for single family homes in Bullhead City, Fort Mohave and Mohave Valley.

We saw an increase in home sales as there were 89 homes sold in February 2010 compared to the 80 the month before.  More good news, the number of homes going under contract during February was also up (130) compared to a year before (57).

Last month (86%) of the homes sold under the $150,000 price tag where February saw 64% of the homes selling under the $150,000 price.  Although the foreclosure sales were up, the sale prices have also increased.  This is good news for sellers and home owners in the Bullhead City, Fort Mohave and Mohave Valley Arizona areas as all indicators show prices are improving.  Tough news for local buyers as they are experiencing multiple offers on the Hot Properties in the under $150,000 price range. As mentioned last month, we expect the real estate market to continue to heat up as the Tax Credit date approaches.  (April 2010 deadline to be under contract and June deadline to have closed escrow)

Bullhead City Fort Mohave, Mohave Valley Arizona Real Estate Market Chart

Our phones are ringing at Country Ranch Realty with buyers asking questions about homes on the market in Bullhead City, Fort Mohave and Mohave Valley Arizona.  With buyers searching for homes to take advantage of the tax credit, and the deadline fast approaching, this should raise seller’s hopes that the offer they are looking for may be on the way.

A special thank you to all our past customers and clients, for taking the time to fill out the Service Survey.  Thanks to your positive responses, I was granted the Quality Service Certified® Gold status in recognition of exceptional service satisfaction measured and compiled for 2009 by Leading Research Corporation (LRC). Client feedback from the surveys becomes part of my credentials.  An overall satisfaction rating is displayed on a consumer website (www.QualityService.org) where sellers and buyers have the ability to select a real estate professional based upon each agent’s validated record of service satisfaction.

Before we get into comparing how the “Steals & Deals” faired this past week we have a special “Hot bonus pick”. This is a special Riverfront pick of the week! The address is  2424 Castle Rock Circle #837181 This Riverfront home in Bullhead city is the best priced we’ve seen in a while at $525,000. It is a diamond in the ruff, built in 2005 with 3400 sq.ft.  it is a 5 bedroom 4 bath home with a nice size boat deep garage & long driveway.  Breathtaking views of river action, majestic mountains, multi-colored sunsets! 3 covered patios- one on each level! Perfect for entertaining, main floor features a combo great rm & kitchen area, fireplace, large bedroom, full bath, covered patio, & VIEWS! Upstairs a convenient laundry area, 3 master bdrms, main Master Suite with a 3-sided fireplace, jetted tub, & covered balcony with VIEWS! River level offers a spacious game room/living area, 5th bathroom, plumbed for wet bar, covered patio & steps down to the water & RIVER FUN!

Now the bad news, being a Riverfront foreclosure in Bullhead city it does have a little damage. This is very minimal as far as foreclosure damage we’ve seen in the past. Your going to need to bring in some doors, fixtures & cabinets but over all not enough to scare you away from this excellent riverfront deal.

HOT HOMES

From our picks from last Thurs. we’ll start with:

THE BEST OF THE WORST:  (These are under $50,000 usually Real Estate Foreclosures/fixer uppers.) Two out three of our picks went pending!!!! 314 Santa Cruz Ave. #837232 & 1650 Luna Media #832757. Not bad, out our 3 picks for this category 2 sold.

https://www.wardexre.com/war/maildoc/a0021t3815.html

$50,000 to $ 150,000: (affordable homes for the first time buyer & some foreclosure deals for the investors) We didn’t do quite as good with these picks as they are all still active BUT out of our three picks 1586 Villa Ln. #833904, 9814 Kingman #833636 & 1833 Bluebonnet Blvd. #839167 the last one has 6 multiple counters out & We are sure it will be pending soon. 1833 Bluebonnet was also our overall pick of the week & we just wish one of the 6 offers was ours.

https://www.wardexre.com/war/maildoc/a006v26545.html

$150,00 to $300,000: (these home were in the $4oo,000 to $600,000 or Luxury homes price range during the Boom) These homes in this price range take a little longer to sell & all three ( 1711 Agate Cir. #838313 & 1454 Arcadia Blvd. #839228 & 3121 Secret Pass Canyon Dr. #833023) are still active but priced in the $80 a sq. ft. range we will keep an eye on them as they will move.

https://www.wardexre.com/war/maildoc/a004fH8167.html

Once again Our Overall Pick of the Week  1833 Bluebonnet Blvd. #839167 is getting a lot of attention from Buyers.

We hope you like our Blog and are looking forward to comments & feedback on what you think of both the content & format & any constructive ways we might improve it.

We will be starting a new item in our Blog referred to as Steals & Deals. On Thursdays We will take different price ranges of property from the Bullhead City, Fort Mohave & Mohave Valley MLS and break down which property in each price range will be the best deal. The following Tuesday we will follow up & compare what’s happening with these properties. We will supply “Our Pick of the Week” and see how that property preforms.

Please click on the Bullhead City MLS Link at the end of each category to view the homes we’re discussing.

THE BEST OF THE WORST: These are under $50,000 usually Real Estate Foreclosures/fixer uppers. There are a couple interesting ones to look at such as 314 Santa Cruz Ave. #837232 & 1650 Luna Media #832757 but for lot size & price per sq. ft. take a look at 2019 Buccaneer Dr. #837787. It has some mold issues in the garage & the previous owner made a stab at renovation but it could be a good flipper or rental to the right investor.

https://www.wardexre.com/war/maildoc/a0021t3815.html

$50,000 to $ 150,000: This is a really popular category as there are some affordable homes for the first time buyer & some foreclosure deals for the investors. We really are looking to stay under $100 a sq. ft. Once again there are a couple to take note of  1586 Villa Ln. #833904 has been nicely remodeled & could make a nice rental, 9814 Kingman #833636 is quite a deal for the sq. ft. ( it’s way down in River Road City but these homes always rent or sell well to the Railroaders in Needles.) but Hands Down our pick is 1833 Bluebonnet Blvd. #839167. At $62.78 a sq. ft. this home has it all, it’s move-in ready, nicely remodeled with a deep garage block wall & RV parking. (I personally would have to paint the stucco as I don’t know if I man enough to live in a PINK house yet.)

https://www.wardexre.com/war/maildoc/a006v26545.html

$150,00 to $300,000: This is an interesting price range as many of these home were in the $4oo,000 to $600,000 price range during the Boom. A Steal or Deal in this price range takes on a whole new face as you have to take account for amenities & upgrades such as Granite & tile, etc. There’s a few of note here too, if you can take a little older home there’s some nice views from 1711 Agate Cir. #838313 & 1454 Arcadia Blvd. #839228 but take a look at our winner 3121 Secret Pass Canyon Dr. #833023 a home in Laughlin Ranch 2,160 sq. ft. it’s under $100 a sq. ft. with all the upgrades!

https://www.wardexre.com/war/maildoc/a004fH8167.html

PICK OF THE WEEK

Our Overall Pick of the Week is also the winner of our 2nd category 1833 Bluebonnet Blvd. #839167.

Please feel free to comment or contact us if you have any questions or any interest in any of these homes.

We hope you enjoyed the video.  Call us today to take advantage of this opportunity.  928-542-3495

Government incentives will likely have a big impact in 2010, with many buyers determined to sign a contract before the April 30 tax credit deadline.

“This year, we’re anticipating sales will peak earlier,” says Nicole Hall, editor in chief of Lendingtree.com, an online mortgage comparison service. “The best time to get your house on the market will be February or early March, and maybe even earlier if you want to avoid competition.”

Traffic on real estate Web sites begins to rise right after the New Year, says Ken Shuman, spokesman for real estate Web site Trulia.com.