This is a great depiction of today’s market conditions – way to go Eric!
Eric Wolff, North County Times
Lenders outplay traditional sellers – Setting lower prices means they get their bid
Lenders are doing better than individuals in pricing houses for quick sales; however, lenders can be difficult to deal with once buyers have started negotiations, said real estate agents and real estate website Redfin.
Between Jan. 1, 2010, and March 31, 2011, in San Diego, final sales of distressed houses went for an average of 99.7 percent of their list price, 3.1 percentage points better than the average for traditional sellers, Redfin said Tuesday. Lenders —- which include banks, credit unions and private investors —- sell houses for more than their list price 40 percent of the time, almost three times as often as typical sellers.
Traditional sellers, whose homes are usually better maintained, want more profit, and they often price their houses too high in the beginning, agents said. By the time they lower the price, interest has waned and they’re more desperate.
In San Diego, 50.2 percent of the houses sold are “distressed,” meaning they’re foreclosures or short sales, in which they’re being sold for less than borrowers owe on them. Lenders make the final selling decisions on these properties, and they usually put the price on the low end of the market to move the houses fast, and to avoid making repairs on poorly maintained properties. But some agents and buyers say that lenders can be difficult to deal with.
Muhammed Thaha, a software engineer, just bought a 4-bedroom bank-owned house in Carmel Valley for $920,000, though it was listed at $899,000.
“Because it was priced attractively, it could attract multiple offers,” said Thaha. “Now you have only one chance to make the final and last, best bid. You don’t know what to do. The house was in a nice locality, so I bid high.”
Lenders sometimes insist on two-week waiting periods before they’ll accept any offer, in order to attract multiple bids, real estate agents said. Oceanside Redfin agent Anna Nevares, who represented Thaha, said lenders make buyers submit bids on “multiple offer addendums,” whether or not they are multiple offers.
“There’s no negotiating games buyers can play,” Nevares said. “They have one shot to give highest and best. It’s a blind auction situation.”
But aside from pricing, dealing with lenders can be very difficult. Thaha said his seller took weeks to answer simple questions, then billed him when he needed to delay the closing.
Lenders are often disorganized and make inscrutable decisions when bringing houses to market, said Carlsbad real estate agent Jim Klinge.
“The only strategy that could be in play is the intentional fumbling and bumbling of these REOs,” he said, referring to foreclosures. REO stands for Real Estate-Owned. “It couldn’t be any more mismanaged.”
Klinge said he recently had a lender send the same property to an auction twice, costing the seller $12,000, and another time he had an Oceanside house in which the seller flip-flopped between making repairs and selling the property as is.
Dealing with traditional, individual lenders can mean avoiding these problems, but they set higher prices.
“I’ve seen sellers price high, buyers bid low, seller rejects it, and then comes back a few weeks later to see if buyer is still interested,” Nevares said. “I’ve seen that happen five, six times lately.”
Klinge agreed that lenders’ tactics of pricing lower are more successful.
“You sell for more by having a sharper price on it,” he said. “Buyers get more excited about the deals, and want to penalize the greedy.”
So Jim, are you saying that the banks sometimes mismanage these REO’s? They seem so well organized to me.
I needed to pull out a dictionary to look up “inscrutable”! Was that your word, Jim, or Eric’s?
LOL, it was his, I had to look it up too.
def., incapable of being investigated, analyzed, or scrutinized; impenetrable.
Though I did remember it being a word used to describe my grandfather’s character as district attorney. It was inscrutable, or unquestionable, which is defined:
def., 1. not open to question; beyond doubt or dispute; indisputable; undeniable; certain: an unquestionable fact.
2. above criticism; unexceptionable: a man of unquestionable principles.
Apparently, this seller didn’t get the memo.
http://www.sdlookup.com/MLS-110000478-3168_Seabury_St_Carlsbad_CA_92010
I looked at this place back in Feb of this year and it is trashed. The work needed is nothing major, but it needs a laundry list of repairs many pages long. In order to remove the ick factor you will need – new windows, roof?, new floors upstairs and downstairs, and a full kitchen remodel. At the time we looked, it had to have been vacant for many, many months previously.
I forgot to mention all of the bathrooms need remodeling as well. And of course, this is assuming the internal structure itself is without any issues.
Q for JTR: When a % of list price is quoted for the sale (97-99% in this article) is this based on the ORIGINAL list price, or the ADJUSTED/CHANGED list price after buyers have dropped it over time?
Would be interesting if the banks are closer on their original offering price and sellers get closer after 2-3 drops then sell at 97% (vs 85% of their initial asking price).
meant “..after sellers have dropped it over time?”
still early..
I talked to Eric about that, and we agreed that the MLS only measures from the current list price, not original.
I’d put regular sellers in the 80s, and bankers around 95% of original list price.
It’ll take some work to calculate it manually.
no need to calculate manually, my instinct was about 85% from original list. I’ve always found it odd that EVERY agent claims to get 97%+ of their list price!
Now I know for sure!
Another thing I’ve seen agent do is lower their list price when marking it sold, thus keeping their stellar 99.9% SP:LP ratio.
There needs to be more transparancy in the market. The whole “hide the ball” aspect of the real estate market tilts the board to the insiders. Not good for the average Joe trying to buy a home. But hey, it works in so many other areas of our social fabric.
The SP:LP ratio is useless info, always has been.