San Diego Foreclosures - A Seller's Market?

We have several bank owned properties in escrow, and here's what we've learned.

The price in the MLS is probably not what the house will sell for. I know you're thinking sure, it will sell for less, but no, it will probably sell for more. Here's why - banks usually reduce the price of a home in big drops, with the aim of generating multiple offers. In other words, if a house generates no offers at $400K, they don't drop it to $380K, they will drop it to $350K. This will create multiple offers and the property will get bid up, so that it will sell someplace between $350K and $400K.

Think of the price as the starting price at an auction, because that's what it is. The bank may play one offer against the other, or it may counter everybody with "highest and best", meaning you have one more shot to make your highest offer and then the bank will decide which offer to take. Or they may simply accept an offer other than yours and you miss out.

It seems buyers have this idea to wait until the bank drops the price, and then offer less. I'm telling you that strategy will not be successful. We lost a bid on a bank owned property in Idyllwild by trying that. We have 3 offers out on bank properties right now for clients of ours, and they are all multiple offers. Yes, multiple offers, today!

I feel like I'm in the middle of a seller's market, even though it's a buyer's market! The seller dictates the terms, picks the services, and makes you sign an addendum where you may have no time for inspections, and you must buy the property "as is" or lose your deposit. We just saw a title insurance report where they specifically exclude any claims arising from the foreclosure process. Of course this was the policy mandated by the bank, and you can't choose another title insurance company. And how about $500 per day penalty if you don't close on time! Does this sound like a buyer's market to you?

There is no negotiation like you would do with a human seller, because you are dealing with an inhuman entity. And still buyers tell me that they think they will stroll up to the bank and make a low-ball offer and get that property for 50 cents on the dollar, because after all, they have cash. The robots at the bank could care less, and so could the listing agent who has 200 listings and has no time for frivolous offers.

Oh, and I forgot to tell you, the bank usually drops the price on Thursday to increase the odds of getting multiple offers. You make your offer on Thursday or Friday. Of course they won't answer you right away, and they are closed weekends. So by time Monday rolls around, there will be more offers on their fax machine besides yours. And they will review them when they get to it. No amount of prodding of the bank or the agent (if you can actually talk to one) will be effective. You must simply wait for a response.

I know this sounds glum, but I'm trying to educate you to today's reality so you can be successful and actually snag a good deal. We have several escrows going right now with bank owned properties, and a few more in the works. So we know what works and what doesn't. If you are serious about getting a good buy on a bank owned property, I can make that happen for you. But you will have to be teachable, and you may have to forget what you read in a book or heard in a seminar.