In the San Diego housing market the undisputed hottest selling properties are bank-owned, foreclosed homes and condos.
Many San Diego home buyers are exhibiting characteristics of the famous Alan Greenspan term, “irrational exuberance.†Use of the terms, “bank owned,†“bank foreclosure,†“lender reposition,†“foreclosure sale,†etc., are sure to draw a crowd to view the property. If the property shows half-way decently, there will be offers, and sometimes multiple offers.
Adding my observation to the above facts, a number of lenders have hit on a marketing ploy to create a buying frenzy which guarantees an almost instant sale. In the majority of cases the offer(s) exceed what may have been realistically expected if the property was marketed the traditional way.
Here are some actual examples of this technique for San Diego home sales.
- On 4-8-09, a bank owned home in east Carlsbad was listed at $499,900. Based on the location, age and size of the home, I estimated the current value at $575,000 to just over $600,000. Within one day of the listing, the listing agent had multiple offers. According to the agent, the lender required it to be on the market one week before they would look at any offers. The agent speculated that based on the number of inquires, she would have 40 to 50 offers in the one week period. This home sold for $597,000. The sales price was almost 20% over the listed price. Doesn’t a sale of $97,100 over the listed price suggest that it was listed way under the market?
- A bank-owned Little Italy one bedroom condominium was listed in March for $234,900. The estimated fair current value for this condo was approximately $275,000 to $280,000. The listing agent stated that within 3 hours of the MLS listing being submitted, he had an offer. Again, the lender would not look at any offer until the condo was on the market one week. This San Diego property generated 21 offers within the 1st. week, of these, 11 were at or above the $234,900, listed price.  This Little Italy condo sold at $295,600, or $60,700, approximately 26% above the listed price! I was told the accepted price was $15,000 above the next highest offer.
- A San Carlos planned-unit-development, bank-owned 4 bedroom was listed at $344,900. The estimated fair value for this condo was approximately $410,000 to $425,000. Inside of one week, this San Carlos property had an accepted offer at $410,000. This was approximately 19%, or $65,100, above the listed price!
Banks are purposely under listing property with the strategy of creating a buying frenzy to result not only in a very quick sale, but, a sale at or above the fair market value. Is this practice fair or even legal? It is on both counts. If the bank does not list it properly, they could end up with a sale way below the current fair market value. On the other hand, it isn’t fair to neophyte buyers/agents. Buyers and/or their agent who do not recognize the ploy, may be wasting quite a bit of time writing offers that in some cases, will not even be considered or countered. Also, what about shattered expectations? A number of buyers/agents may honestly believe that their full price offer has a chance of being accepted. In reality, they not only have zero chance of getting their offer accepted, but in the majority of cases, they will not even get a counter-offer.
So what is a potential buyer looking for a bank owned property bargain to do? If they are smart, the best advice would be to seek out an experienced agent and implicitly follow that agent’s advice.
We have seen several deals fall apart because the appraisal couldn’t find enough deals within a certain window and within a limited area!
acne medicine
If we look at the economic trends along with Real Estate market trends, we can realize that what may seem like a “bad market” for some people is the same market that “big” Real Estate Investors have bought the properties that made them millions. However, there are many people that are getting ready to capitalize on some great investing due to the common sense theory of investing, BUY LOW…SELL HIGH!
San Diego plastic surgery
I don’t see an issue with what the bank has done. It doesn’t waste anyone’s time if the people involved look at the numbers. I do not know the San Diego market but your explanation shows that the banks were not receiving above market prices for these homes, but where using an old-fashioned technique of starting with a low-price and allowing the “bidding war” to drive prices up. Good for them.
The best advice is to use an experienced agent and do whatever they say? I’m sorry, but I have to disagree here. I admit that as agents we all want our clients to be able to trust us and follow our advice, but to “implicitly follow” an agents advice just because they are experienced is asking for trouble.
This isn’t just about people bidding up properties, it’s about homes actually selling for fair market value. I’ve been dealing with these bidding wars myself recently, and I’ve found that experience is the best education for home buyers. Once they lose one or two deals because of a bidding war, they start to understand that nothing really comes that cheap and they re-evaluate their plan of attack.