If you have tried to purchase a bank owned foreclosure home in the last two months you have surely seen the how competitive it has been. Most houses are going to multiple offers and many of those are going well above asking price. I have two customers I am currently working with who have made 3 and 4 offers, all of those offers have been at or above asking price, and they are still looking.
Why is this? The obvious answers are low prices and great interest rates, but the current situation goes a little deeper than that. This buyers market may have turned into a sellers market for the banks.
As of 2:15 PM today there were 6,307 bank owned properties on the market in the Arizona Multi-Listing Service. In the last 30 days 5,352 bank owned homes closed. That means there is only a 1.17 months supply of bank owned homes on the market today in the Phoenix area.
So when you go to put an offer in on that bank owned home and your agent tells you that the full price offer may not be good enough, now you know why.
Dean,
Thank you for the article. I do have to say that I don’t fully agree with the simple math you propose, as there are still over a 1000 homes a day that are appearing at the court steps to be auctioned off; that will be slowly passed on to the market place so not to have a panic of with all these homes coming on at once. There is still plenty of reserves that are being held by the banks, and that can be verified by looking at their P&L sheets that publicly traded banks must report to their share holders.
Tell your clients not to get discouraged, and that there are plenty of “fish in the sea.” If there is an area to be somewhat concerned about, it is with the lending institutions, and how unhelpful they have become during this entire process. Finding the solutions around that is the biggest obstacle any home buyer should be concerned about. Quick all cash offers are your best bet, if you can raise the capital, and that also takes into consideration the fact that unless you have an 800 credit score (well maybe not that high – but get what I mean) the financial institutions don’t want anything to do with you. Your clients will have you jump through hoops (that lead nowhere) just so that the banks can prolong the process as long as they can, so they can take another (possibly better or quicker closing) offer.
Anyhow, I am someone who wants to do something about this. I am looking for people that have been foreclosed on (I mean literally kicked out of their home) and who want to move back home or, to a home that is more suitable for them. If you have any suggestions as to I would find someone like that, I would love to hear your suggestion(s). You can reach me at 928-714-7123. Lets chat and even brainstorm to find a way to solve this issue.
Best Regards
Nick
Nick, first thanks for leaving such a good thought out long comment, but I need to disagree with you, at least with what we are seeing here. Banks have got a lot better over the last few months and most of my buyers are between a 680-780 and they are having no problem getting loans. Banks have got much better at working with buyers too, although they are still far from perfect.
As far as new properties coming on we all know they will, there are still plenty of foreclosures coming, but with the dwindled supply its getting harder and buyers need to be much more aggressive when they find the one they really want.
Dean
“Finding the one they really want” is an oxymoron. Any house can be turned into a home. It worries me that buyers would spend more, or over bid (sounds familiar to how we got into this mess) for a property that just isn’t worth the financial headache. I am a huge proponent of people owning your home, however I am not afraid to say that some people should hot be homeowners; yet (even at these great prices).
This is what makes this country beautiful; that even though we may be neighbors, and fellow caring humans, we can choose to agree and disagree freely, and not be killed for doing so (maybe a bit extreme – but you get my point).
Clients with a 680+ score should have an easier time getting a home, and if they are not then I have to wonder the type of homes they are looking to purchase. It seems as though finding a person with a 680+ score today is like finding a gold coin at a pawn shop (they exist, but rare in many cases). Any one with that type of score should have quite a few homes to choose from. Looking at today’s auction (for example) there are over 50 homes (out of the over 900 being auctioned) that have well over 40% LTV (staring bid of $30K) and the value is based off other comparable bank REO homes that have sold in their area. As for the MLS, there are over 350 REO properties available in “highly desired” areas that are starting from $50K. Though those numbers might seem low to some, there is still plenty of gas in the tank.
So, if your clients “want” to purchase a home, there are many out there to choose from, and at great prices. There is no need to get into a “bidding war” because it is likely that you wont be competing with another home owner, but rather an investor. And I will say this, as I am purchasing homes for clients with worse credit scores than yours, cash is king, and will get looked at by the banks first, even if you overbid me. Don’t let your clients get discouraged, just show them more properties. I don’t want to assume, but its likely that your clients may be first time home buyers, and if they are, you will have to hold there hand a bit and guide them. You will find a home that is right and that they will be able to purchase, but I strongly suggest that you look for the path of least resistance.
I wish you all the best in your journey
Nick