Let's talk about a home owner in distress. An investor comes along and gets the owner to agree to sell their house to the investor. The investor then opens negotiations with the bank. The "buyer" in the offer is one of the investor's employees. They don't use their company name as the buyer. The bank is then given the buyer's phone number, which is the company's phone number. When a Realtor is called out to do the BPO (broker price opinion), they are only allowed in the property escorted by yet another employee of this investor. The investor's employee then gives the Realtor a packet of information. This generally includes misleading comparable properties they want us to use as well as information regarding the offer on the table. It gets worse. I have even been given copies of letters from junior lien holders with the owner's account numbers.
While the investor is negotiating with the banks, they put the house in MLS at a much higher price. They market it with themselves as the seller. They are looking for an end buyer who will pay more.
They secure the buyer, and then they close escrow on the property. They are now officially the seller, though in MLS they were already representing that they were.
Here is a sticky point. Oregon law only allows Realtors to hold an earnest money check for three days. Prior to the investor taking title, the title company can't open an escrow file for it. They can't have two files open on the same house at the same time. So, they are unable to hold the check. We have checks sitting around for weeks at a time, waiting for a home.
I welcome your thoughts and opinions...
Monday, August 30, 2010
Friday, August 13, 2010
The random pricing strategy for short sales.
I just completed a BPO on a really great property and as I was looking at the active and sold comps out there, steam was coming out of my ears.
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The random pricing strategy for short sale properties never ceases to amaze me. The following is mathmatecially accurate, but I have changed the names and numbers to protect the not so innocent. After you read it, tell me how you feel about short sales. I want you to also remember every sale recorded will impact the value of YOUR property. So, if your neighbor decides to no longer care and sell for below value, your value just went down.
.
All comparable properties were within a one mile radius of the subject. Our market is fairly stable, we have had a decrease in activity since the end of the tax credit, but activity in April was artificially increased due to the tax credit, so the drops we are seeing are not as drastic as they seem.
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The subject's suggested value is $215,509 which is significantly higher than it's current listing price of $148,500. This is because the property is listed below value. In our area we have an alarming situation of homes being undervalued in short sale situations. The reason is because the seller doesn't care. When it comes to the point that the seller will be receiving no funds from the transaction their motivation to get the highest price possible is removed from the equation.
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In addition, we have listing agents who arbitrarily assign list prices without any thought to the actual value, again because it doesn't matter to them or the seller. Their primary goal is to get as many homes sold as fast as possible.
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The listing agent on this specific property is active in the short sale market and heavily solicits distressed property owners to short sale their homes.
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It is also important to take attention to the listing history. The subject was listed with this agent on June 7 2010 for $180,000. At 13 days on the market they dropped the price to $171,000. At 24 days on the market they dropped the price to $157,5000 and at 37 days on market it was dropped to $148,500, the current listing price. This is a well known strategy, list at a higher price and do frequent reductions. On the surface, Reliable Randy Realtor can then tell the loan servicing company that a higher value was tried and with consistent price reductions, they finally had to drop to such a low price due to lack on interest. The reality is that the property was not given a fair chance to receive an offer. 37 days is not enough time in our current market. In addition, buyers are shying away from short sales as they are tired of the inconsistency and lack of responses from banks. They are much more inclined to buy an REO or a fair market sale.
.
That is all!
.
The random pricing strategy for short sale properties never ceases to amaze me. The following is mathmatecially accurate, but I have changed the names and numbers to protect the not so innocent. After you read it, tell me how you feel about short sales. I want you to also remember every sale recorded will impact the value of YOUR property. So, if your neighbor decides to no longer care and sell for below value, your value just went down.
.
All comparable properties were within a one mile radius of the subject. Our market is fairly stable, we have had a decrease in activity since the end of the tax credit, but activity in April was artificially increased due to the tax credit, so the drops we are seeing are not as drastic as they seem.
.
The subject's suggested value is $215,509 which is significantly higher than it's current listing price of $148,500. This is because the property is listed below value. In our area we have an alarming situation of homes being undervalued in short sale situations. The reason is because the seller doesn't care. When it comes to the point that the seller will be receiving no funds from the transaction their motivation to get the highest price possible is removed from the equation.
.
In addition, we have listing agents who arbitrarily assign list prices without any thought to the actual value, again because it doesn't matter to them or the seller. Their primary goal is to get as many homes sold as fast as possible.
.
The listing agent on this specific property is active in the short sale market and heavily solicits distressed property owners to short sale their homes.
.
It is also important to take attention to the listing history. The subject was listed with this agent on June 7 2010 for $180,000. At 13 days on the market they dropped the price to $171,000. At 24 days on the market they dropped the price to $157,5000 and at 37 days on market it was dropped to $148,500, the current listing price. This is a well known strategy, list at a higher price and do frequent reductions. On the surface, Reliable Randy Realtor can then tell the loan servicing company that a higher value was tried and with consistent price reductions, they finally had to drop to such a low price due to lack on interest. The reality is that the property was not given a fair chance to receive an offer. 37 days is not enough time in our current market. In addition, buyers are shying away from short sales as they are tired of the inconsistency and lack of responses from banks. They are much more inclined to buy an REO or a fair market sale.
.
That is all!
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