Orange County

[PatienceGolden]

I've been coming across several listings in recent weeks which are recently foreclosed properties (within 90 days from foreclosure date) and the new listing price is significantly higher than that of the foreclosed price (and the properties don't seem to have undergone major renovation). 

I guess I'm happy to see banks FINALLY beginning to turn around REO properties in a hurry (and not holding them on their books for years like they have been since 2008), but are they cherry-picking to ONLY list properties they think they can sell for a gain to spruce up cash on their balance sheet?

here's an example I came across this morning...

http://www.redfin.com/CA/Irvine/7-Bluebell-92618/home/5887882

Foreclosed on 12/2/2011 for $429,000

Listed 2/5/2012 for $560,000

[PaulReid]

Hi PatienceGolden,

I don't want to speculate what the bank's motivations are, but the home you referenced isn't actually bank owned from what I can tell.

It does state that it was foreclosed on the public record, but there is an individual listed as the owner and the sale is listed as a 'standard' sale, not an REO. The public record will say it was foreclosed if it was purchased at a trustee sale. Sometimes it will say 'foreclosed and bank-owned' and sometimes it will say 'foreclosed and sold at a trustee sale' or something of that nature.

Odds are that this one, and perhaps others you're seeing, were purchased by investors and are being turned around quickly. This one actually says there are tenants in it so showings are limited. 

Hope that helps and have a great day,

[PatienceGolden]

I see, thanks for the information!

[AlexSin]

When I purchased my house it was a REO but it was listed as a STANDARD sale without any reference to bank ownership.

[PaulReid]

Thanks AlexSin,

I have seen a few of these as well, but fortunately they're not too common. Call a spade a spade is my opinion.

Thanks for point that out.

Have a great evening,

[cdcrezz]

Patience Golden -Your example may not be perfect, but your assertion is correct.  The much larger majority of REO is listed for and SELLS for more than the winning bids at the foreclosure auctions for the exact same properties.  I found this a bit disconcerting for awhile because the difference between prices was many times quite large, but after realizing why there is a difference, it no longer seems odd.

The difference is due to the fundamental issue of supply and demand.  There is much less demand for CASH ONLY deals than for mortgage contingent deals.  I don't know the exact number, but I would guess that 95% of potential buyers are excluded from buying at foreclosure auction because of the cash only requirement.  It seems that most non-flipper buyers also do not explore the possibility of previewing homes that are up for auction.  The banks operate on the "whatever the market will bear" principle.  Generally speaking, they sell to the highest bidder, whether at auction or by listing, and they will probably receive less at auction because of the cash only requirement.  The lenders do not nefariously list for more or less by conspiracy.  They sell for as much as they can, and they can sell for more to the larger pool of buyers who need a mortgage to purchase.

The selling price of homes at foreclosure auctions are a more accurate representation of property values because they do not include the premium for mortgage accessability.

[BobPhillips-RE]

cdcrezz stated:  "The selling price of homes at foreclosure auctions are a more accurate representation of property values because they do not include the premium for mortgage accessability."

How can anyone think that 5% of something, is an accurate representation of the whole?

THE most accurate representation of something's value, is the median price paid by 100% of its buyers.  

The extreme 5% at each end of the valuation curve might just as well be thrown out, due to their irrelevance to the majority. 

[AlexSin]

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cdcrezz wrote:

Patience Golden -Your example may not be perfect, but your assertion is correct.  The much larger majority of REO is listed for and SELLS for more than the winning bids at the foreclosure auctions for the exact same properties.  I found this a bit disconcerting for awhile because the difference between prices was many times quite large, but after realizing why there is a difference, it no longer seems odd.

The difference is due to the fundamental issue of supply and demand.  There is much less demand for CASH ONLY deals than for mortgage contingent deals.  I don't know the exact number, but I would guess that 95% of potential buyers are excluded from buying at foreclosure auction because of the cash only requirement.  It seems that most non-flipper buyers also do not explore the possibility of previewing homes that are up for auction.  The banks operate on the "whatever the market will bear" principle.  Generally speaking, they sell to the highest bidder, whether at auction or by listing, and they will probably receive less at auction because of the cash only requirement.  The lenders do not nefariously list for more or less by conspiracy.  They sell for as much as they can, and they can sell for more to the larger pool of buyers who need a mortgage to purchase.

The selling price of homes at foreclosure auctions are a more accurate representation of property values because they do not include the premium for mortgage accessability.

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All-cash sales accounted for 33.2% of sales in December, up from 29.5% a year earlier, according to the Campbell/Inside Mortgage Finance statistics. Among investors, 74% paid all cash.

[cdcrezz]

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AlexSin wrote:

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cdcrezz wrote:

Patience Golden -Your example may not be perfect, but your assertion is correct.  The much larger majority of REO is listed for and SELLS for more than the winning bids at the foreclosure auctions for the exact same properties.  I found this a bit disconcerting for awhile because the difference between prices was many times quite large, but after realizing why there is a difference, it no longer seems odd.

The difference is due to the fundamental issue of supply and demand.  There is much less demand for CASH ONLY deals than for mortgage contingent deals.  I don't know the exact number, but I would guess that 95% of potential buyers are excluded from buying at foreclosure auction because of the cash only requirement.  It seems that most non-flipper buyers also do not explore the possibility of previewing homes that are up for auction.  The banks operate on the "whatever the market will bear" principle.  Generally speaking, they sell to the highest bidder, whether at auction or by listing, and they will probably receive less at auction because of the cash only requirement.  The lenders do not nefariously list for more or less by conspiracy.  They sell for as much as they can, and they can sell for more to the larger pool of buyers who need a mortgage to purchase.

The selling price of homes at foreclosure auctions are a more accurate representation of property values because they do not include the premium for mortgage accessability.

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All-cash sales accounted for 33.2% of sales in December, up from 29.5% a year earlier, according to the Campbell/Inside Mortgage Finance statistics. Among investors, 74% paid all cash.

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Thanks.  Like I said, it was a guess.  How about 67% of all buyers, ... ?

[PaulReid]

cdcrezz makes a great point, and cash is only the first part of the equation when it comes to trustee sales. Investors may be paying cash for a lot of the properties they are buying, but they're buying them mostly from properties listed on the MLS. Buying at a trustee sale takes more due diligence and a much more thorough understanding of how property transfers, liens and deeds work. Of those 33% of sales that were cash in December I believe a fraction of those buyers would have the ability to walk into a trustee sale and confidently bid on a property. There's no escrow, title insurance or real estate agents when it comes to buying at a trustee sale.