Obviously real estate market news is local and it is worth noting that my real estate blogs are for my team’s experience in western Atlanta suburbs (Cobb, Paulding, Douglas and Cherokee counties).
There is definitely a misconception of foreclosure buying out in this market at the present time. Some buyers will listen to their Realtor’s sound advice from the beginning and some will lose a few homes before they accept the reality. The reality is there is NO LOWBALLING on foreclosures!
Yes, I said it! The foreclosure myth is that a buyer can submit a lowball offer to a REO (Bank owned property) and they will gladly accept. What this means is that a home that is priced at $150,000 and the buyer thinks they can buy at $75,000. So sorry to disappoint!
Right now there are two different scenarios we are seeing in the marketplace:
- Foreclosures are already being priced well below fair market value and a flurry of offers come pouring in within days (or hours) of it hitting the market causing a multiple bid scenario. For example the foreclosure was purchased a few years ago at $235,000. Current comps in the neighborhood (actives and solds) are ranging from 175k – 215k. The bank has the foreclosure priced at 150k. In a multiple bid scenario it is very rare that the home ends up selling below the list price and many times it sells for ABOVE the list price.
- Foreclosures begin pricing at or just below fair market value and when no offers (or reasonable offers) are presented, the bank typically reduces in small increments on a monthly basis. Normally the reductions are dependent on the price point and range between $5000 – $10,000 per price reduction. This becomes interesting because a home can be on the market for a few months and after a particular price adjustment it now becomes the “magic number” and you guess it! A flurry of offers ensue causing a multiple bid scenario.
It’s actually pretty interesting as some foreclosure real estate agents actually post the transaction history for a particular property. For instance, recently one of my team’s Buyer Agents submitted an offer for a foreclosure that had been listed for 6 months! In the six month history the property price had been reduced a total of $40,000 from the original list price and had received 7 offers that the bank rejected. The bank had just reduced a mere $3,000 and that was the “magic number”! We now found ourselves in a multiple bid scenario. We advised our client of the situation and submitted our best & final offer which I must add was above the list price. We were outbid!
Is there room to negotiate with bank owned foreclosures? Yes but it depends on the scenario. Luckily in Georgia it is very commonplace for the Seller to pay Buyer’s closing costs so it is rather common for the bank to agree to that. If submitting an offer and the buyer’s agent can confirm that there are no other offers on the table, I have seen banks agree to anywhere from 5,000 – 15,000 in price reductions (depending on the price point). However in a multiple bid scenario, watch out and get ready to ante up or lose out!
If you are interested in buying a bank owned foreclosure, we would love to assist! The Walker Derby team assists buyers looking to purchase foreclosures in Acworth, Austell, Atlanta, Canton, Douglasville, Hiram, Kennesaw, Mableton, Marietta, Powder Springs, Roswell, Sandy Springs, Villa Rica and Woodstock
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