Many of my current short sale sellers have been trying to sell their home before they opted to short sell with me, most have attempted to sell for many years with other real estate agents. These sellers have great homes and in great locations, so why are they at the end of their rope? They chased the home pricing spiral.
Chasing the home pricing spiral means they have been behind the curve of dropping values. When they were priced at $250k they should have been at 235K, by the time they lowered to 235K they really should have been priced at 225k. Once the seller finally agreed to lower to 225k, values were sitting around 210k.
Let’s face it, not all Realtors are like me. I am like the Dr. Phil of Realtors, telling you like it is. Sometimes my no holds barred talk gets me in trouble but in real estate it is exactly what you need to hear (whether you want to hear the truth or not)!
I would say I average 3 calls per day from sellers interested in having me list their homes for sale. I do not rush out to take these listings, rather I prequalify them over the phone. I ask them about their property, pull up comps and discuss expectations. Gone are the days of breaking ceiling heights in neighborhoods, sellers have to be realistic on where home values are. They are not where they were 2 years ago, some areas not even where they were 6 months ago. Most sellers are surprised when they say “we don’t have to sell our home, we don’t plan on giving it away” that I respond quickly with “If you do not have to sell your home then DON’T SELL YOUR HOME”. This is not the market to put feelers out to see where buyers are nibbling. I know where buyers are and they are not looking at overpriced homes. To be quite honest they aren’t looking at homes priced at fair market value either. Buyers are looking for deals and they have quite the inventory of foreclosure and short sales to choose from. If you aren’t willing to compete at or near that level then you shouldn’t be on the market. Sure there are plenty of agents out there ready to take your overpriced listing, but they know good and well that it will not sell. They are just hoping to pick up a buyer lead off their sign in your yard. I am not one of those agents, my listings SELL!
Proper pricing is crucial in this market, more crucial than ever before. While most of the markets I work seem to have stabilized (some even slowly inching up a touch in values) you still need to be realistic about your values. Every neighborhood has been affected differently, some East Cobb neighborhoods have only seen a 6-8% decrease in values whereas some neighborhoods in South Cobb have decreased more than 35%.
For a no obligation market analysis of your home, feel free to contact us for more information. Dr. Phil impersonation is optional
You have been out scouring the area you want to be in, walked through dozens of homes in search of the right one. Finally you find it, your dream home! You submit an offer and are looking forward to an acceptance or a counteroffer but instead you are hit with a “Multiple Bid Scenario – Please submit Best and Final Offer”.
What?!?
What this means is that other buyers have stumbled across your prized home and fell in love just like you did! Sometimes it is a foreclosure property, sometimes a short sale and sometimes it is a regular resale listing. Many buyers become very stressed out asking me how to handle it and my answer is always the same. “Best and Final” is actually what it means. The seller is looking for your absolute best and final offer, there will be no counteroffer, the seller will move forward with the best net offer on the table by the offer deadline. The offers of others will always be held confidential (sometimes so will the number of offers on the table).
In these scenerios it is crucial to know the comps of other properties in the neighborhood. In the event of a foreclosure, the property could be priced well below fair market value and the bidding could significantly increase the final sales price. For instance, not long ago a foreclosure hit my client’s radar hours priced at $114,000. After reviewing the comps I found that sales in that Powder Springs subdivision ranged from $189,000 – $260,000 and this particular foreclosure was the largest floorplan in the subdivision. We submitted an offer for $135,000 which was $21,000 OVER ASKING PRICE. Unfortunately we lost the bidding war. We found out later that the property sold for $164,000 – Fifty thousand over asking price. While that is not the norm, it is an example of how important comps are when bidding.
Normally, as detailed in a previous blog “The Skinny on Foreclosure Bidding”, multiple bid scenerios usually result in a final sales price at or above list price. With that being said, how do you know which number makes best sense for you?
I always tell my client to think about the number that they can sleep well at night knowing that they wouldn’t have paid 1 penny more for in the event they lost it. Nothing worse than a client coming back to me and saying “I know I bid $150,000 but I really would have gone up to $154,900”. In best and final scenarios, your absolute highest bid is what you should submit. If your submit best and final is truly that, there is nothing more you can do. Good Luck out there!
I was recently out with a buyer showing a brand new listing in Marietta, GA. As we pulled up, an agent with buyers were leaving. As we walked around the house and property, two more sets of agents with interested buyers came through. When we left another agent pulled in. Since I knew this was exactly what my buyer had been waiting for being priced well under fair market value, I told him that “time is of essence”. We had lost out on two other homes before now so he agreed that we should go to my office and prepare an offer. Even after losing two other bids I was floored when he told me “paying list price is just paying too much, Jennifer”.
One of the biggest misconceptions in real estate is that paying list price is simply overpaying or not getting a good deal. Nothing could be further from the truth, especially in the land of foreclosures and distressed properties. As detailed in the recent blog “The skinny on foreclosure low-balling”, it is not uncommon for both banks and distressed selling agents to price a property aggressively and watch a flurry of activity ensue. Often this flurry ends with the property selling well over list price.
As a short sale agent, when I take a new short sale listing I purposely price the home at the lowest price I feel the bank will accept. I don’t pull numbers out of the clear blue sky, I base them on actual distressed sales within the past few months as before any short sale is approved it must pass a BPO (Broker Price Opinion). When agents show my short sales and call for offer instructions, I communicate how price was derived and that we expect a full price offer. Every once in a while you get the buyer that refuses to put in an offer at list price and 99.99% of the time that buyer loses out on the home.
Buyers: Do not base your emotions on the list price, base them on the comps! If the home is listed at $200,000 and comparable homes in the neighborhood have sold between $215,000 – $245,000 then you are getting a good deal at list price. Don’t allow a misconception get in the way of the home of your dreams!
Today I received another lowball offer on one of my listings. The agent wrote on the cover letter that this was a CASH buyer, as if that would soften the blow. This made me realize that perhaps I should write a blog on why CASH is not king and break open this myth! So this is an open letter to all Cash buyers:
Dear Joe Q. Cash Buyer,
Thank you so much for your interest in my listing. I see you have cash that you want to purchase a home with, Congratulations! Sure it is nice that there is not a financing contingency attached to your offer, but what makes you think it makes your offer any better than the other offers I receive? At the end of the day it is all about the NET that the sale brings to the seller. This means:
Sales price – costs (closing costs, commissions, etc) = NET
Cash does not have any effect the net, all it does is make the closing possibly happen a little sooner. Curious how you find that is worth HALF off the list price? Just because you don’t have to qualify for financing doesn’t mean it is a done deal! We still have to get through inspection and your appraisal (if you want one), the soonest we could close is in about a week compared to another offer than will close in 30 days. At the end of the day the seller (whether a homeowner or bank) only cares about their bottom line. Neither myself or my sellers could care less if you have a loan or pay in cash, blood or pennies, what we care about is the net to my seller!
Respectfully-
JWD / Realtor Extraordinaire
On a side note, the risk of the cash buyer is that it is easier for a cash buyer with $250,000 in the bank to walk away from a binding contract losing their earnest money rather than a financed buyer who saved up for months for their earnest money deposit.
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
