YES THEY ARE AND NO THEY'RE NOT.
by James Frangella
Written on Thursday June 26,2008 5:20pm; Updated Saturday August 15, 2008
I’m certain you’ve read and heard the media touting June sales figures are up over the previous month. The numbers are now in for July and the results are similiar. The Monterey Peninsula is no different than the rest of the state. Buyers are no longer “sitting on the fence” and are actually writing offers. Affordability pricing has arrived for our entry-level communities and that’s driving our market. CLICK HERE to see what the most recent sales activity for single family dwellings are doing in Monterey County.
As more and more banks and lending institutions take back real property off the courthouse steps, we’ll continue to see the best kind of sellers; motivated sellers and they are not emotionally attached to their homes! They want to sell. Banks are in the lending business. They do not like to own real estate. When they do, their properties are classified as REO (real estate owned).
Banks tend to be fairly savvy in the high finance department. They hire the brightest and best graduates from our universities. They trade big time in global economies, making vast sums of monies. Then they lend money to home buyers and make even more money ... until just recently. Now I’m not so sure they’re so smart. They bought high and now are selling low. This is not what they were taught in school to do.
I’m not going into the reasons or the causes for what happened to our real estate market. However, if you need to know, read this article from the Washington Post titled The Housing Bubble, In Three Parts:
http://www.washingtonpost.com/wp-dyn/content/story/2008/06/14/ST2008061401569.html
Suffice to say, we are having a golden opportunity to buy real estate on the Monterey Peninsula at prices that make sense. All one has to do today is call their Realtor (preferably me) and ask to take a look at the bank-owned homes for sale. There are dozens and dozens in Seaside and Marina but you’ll also find a few in Carmel, Pebble Beach and other Peninsula cities as well. Bank-owned properties are priced to sell and sell they do!
So how can you tell which bank-owned properties are a good deal or not?? This is not an easy question to answer. But basically there are three criteria that a buyer should pay attention to: location, the overall condition and finally, the price. I would highly recommend using a Realtor as a buyer’s agent to represent you when buying bank-owned properties. Banks are exempt from many of the disclosure and inspection requirements. The saying “buyers beware” has extra meaning in this case.
Properties that have either condition or location issues and have not been priced accordingly will sit on the market. If the bank does price it correctly, then the property will sell quickly with multiple offers. Since REO properties are sold “as is”, the overall condition is important. No one wants to spend thousands of dollars for necessary repairs or corrections unless they buy at an incredibily low, low price!
I know of a bank-owned house in a sought-after area in fairly good condition with about 1800 square feet of living space and just-listed at about $425,000. Of course, it already has multiple offers after only a few days on the market. And why not? That breaks down to about $236 a square foot. I don’t think you can even build for $236 per square foot and buy the land too!! There we go folks, a simple formula to determine whether bank-owned properties are a good deal or not. It’s a really good deal if you can pick them up for less than $250 a square foot* and not have to throw in a ton of money to fix them up.
There is a slight hiccup with this formula as it doesn’t always work out. I know of one bank-owned property with over 245 days on the market and finally lowering their price to about $266 per square foot. It is in deplorable condition. Last I heard, it’s still available for sale. I’m not sure lowering the price by another 10% would help either.
I know of another one in fairly good condition with 35 days on the market and coming in at $295 per square foot. When I inquired on behalf of my interested buyer, I discovered that there were already two offers on the property. I was told by the listing agent that they were “very good” offers and I shouldn’t bother writing one up. The bank was very slow in responding to the two they already had. This didn’t make any sense at all to me.
No wonder the banks are in trouble! Why does it take them weeks to say yes on a full price offer?? Could it be that the banks are so back-logged that they cannot process all the offers they are receiving? Could it be that the market is booming? Folks are actually buying in droves and maybe bidding prices up?? It’s not just happening on the Monterey Peninsula either. Check out this recent article from the Associated Press:
www.msnbc.msn.com/id/25009827/
What if prices have leveled-off? What if they’re not going down any further? Affordability pricing has arrived - even as more and more foreclosures hit the market. Lots and lots of homes for sale but then again lots and lots of homes are being sold! Maybe the market is bottoming out.
* Only applies to entry-level communities. No way does this fly in Carmel!