Happy new week all! This Foreclosure article concerns me. Not because it’s a bad article, but, because many now think they can go find a foreclosure and get in a bidding war on the home! Hello…. – this is how we got in trouble in the first place – folks going crazy on the issue of supply and demand – trying to outbid someone for another home. Read the article with this advice – don’t assume a foreclosure is priced cheaply… More on that later. Enjoy!
Foreclosure properties have become hot commodities in the current market. So hot, they are sparking bidding wars between first time buyers and real estate investors. There is a huge inventory of unsold homes, all throughout the U.S., and foreclosures are on the rise.
It’s becoming more common to see multiple offers on the same properties as buyers zero in on the bargains offered by distressed properties. This is especially prevalent in California, Arizona, and metro Washington, D.C. and Minneapolis-St. Paul.
Even though there is a large inventory of foreclosures, the quality properties, still in relatively good condition, and in the $300,000 price range are going fast. It’s not uncommon for first time buyers to be repeatedly outbid by investors who show up with cash for these lower priced bargains.
There are still a number of markets with an large excess of inventory. Areas especially struggling with empty condos and vacant homes include South Florida and New York City. In Manhattan housing inventory has increased 32.5% giving them a 14 months supply, where most other areas have finally begun declining in numbers. In addition, banks have been backlogged with unresolved foreclosures, and many of these are expected to flood the market within the next few months. Lower than normal advertised prices of these homes sets a standard for the entire market, artificially lowering the price of regular homes.
The States with the highest foreclosure levels include California, Arizona, Nevada, Florida and Michigan. Most buyers are sorting through these types of listings first, leaving owners of regular properties waiting on the sidelines, refusing to slash their prices to compete with the banks. In Sacramento, CA, alone, two-thirds of March real estate sales were foreclosures. This represents about a one month supply of inventory before delving into non-bank owned properties which are 8 times higher in availability.
Sometimes a bank has held onto a property long enough and will cut the price drastically. Such was the case with a Norwich, Conn. duplex where the price was reduced to $73,900 from $144,900, prompting five offers. How does the regular guy down the street trying to sell his home compete with that?
Cherie Hunt of Prudential California Realty cites a recent case in West Sacramento where her buyer won against two other bidders for a three-bedroom home. They agreed to pay almost $220,000, which was almost $10,000 over the asking price. The same home sold for $405,000 in 2005.
Unfortunately this type of buying is having an opposite effect on some purchasers who after being out bid after offering tens of thousands of dollars over the asking price, are now throwing up their hands in frustration – swearing off bank-owned properties. Many get caught up in the bidding and pay more than the property is worth.
Ronald Peltier, chief executive of HomeServices of America Inc. claims this type of action is a good thing, claiming “We do need to flush out the distressed inventory, before the rest of the market can stabilize.”
It seems that the real winners are those who have the patience to wait for the right deal to come along and not get sucked into the competition of bidding.