Del Mar Renter asked,
I’m a little confused about your comment in the other related posting on this topic:
“REOs will sell for retail”.
What does that mean? Isn’t the whole point that we don’t know what “retail” really is? Maybe I’m missing something.
The reason I say that is because banks and servicers use the retail method for price discovery.
The asset managers vacate the properties, and spend some money to get them in selling condition. They compare the appraisal(s) to the listing agent’s BPO and come up with an attractive list price. Then they make sure the property has been on the MLS for 5-7 days to ensure that potential buyers had ample time to see the property.
If there is an offer, they counter to see if the buyers will come up. If there are multiple offers, they request that all submit their highest and best offer, and hopefully they’ll pick one.
Occasionally they won’t, and instead try to work one of the buyer up even higher. This just happened yesterday on the Harvard property, where two cash offers submitted their H&B and both were just over list price. The asset manager countered again for an extra $2,000, one of the buyers agreed, and then the AM made them cough up an extra $200!
How do we know that this is retail?
When every buyer has a fair chance to participate, the retail value is defined by the price that a ready, willing, and able buyer is willing to pay.
The process enables the maximum participation, and thus, ensures top dollar.
The best chance for any homeowner to get top dollar is early on in the listing, when the urgency is highest. Almost all elective sellers IGNORE this advice, and insist on pricing high, and then chase the market down later.
How do I know that a seller won’t get lucky, later? It is possible, but highly unlikely in a soft market. It is much more likely that their high price will cause lower-priced homes to sell, creating a downward trend. Lucky sales happen more in an rising market – so if you selling and want to hold out 2-4 months, ask yourself, “are we in a rising market?”
How do I know this is the best way to achieve top dollar?
Anyone who is in this market full time will realize within weeks that buyers are well-educated on values (usually better than the realtors), and the motivated (read: frustrated) buyers are scanning the new inventory every hour, hoping to find the perfect house and buy it before anyone else beats them to the punch.
It should be common sense that urgency matters, and sellers should take advantage of it, like the banks do. But it isn’t that obvious, especially to realtors who are happy to take listings priced way too high (saw one last week that listed for $1,000,000 higher than my recommendation!) and hope they get lucky or can work the sellers down on price later.