Some banks are starting to get it…much to the chagrin of sellers
Well, it looks like some banks are starting to realize that their REO holdings are no longer simply competing with one or two other foreclosures and a bunch of ‘traditional’ residential resale homes for sale. They’re competing against a whole bunch of short sales and REOs in any given community, and all the neighbors are left holding the bag.
Over the weekend I visited several foreclosures with different sets of clients. I felt like we were back in 2005, in the height of the market. There were several people at the homes, snapping photos and talking on cell phones in hushed voices. We submitted 2 offers on 2 standouts and are in multiple bidding situations on both properties. This mirrors what I’ve seen on a few different occasions over the past 30 days.
In this case, the lenders are Countrywide and Citibank, and their foreclosures don’t represent the ‘head in the sand’ prices we have gotten used to seeing from banks over the past year or so. I think they’ve worked past the denial stage and are now aware of the significance of the problem that they helped create.
Unfortunately, it’s the common person, the ordinary seller, who loses yet again. Every one of the foreclosures and short sales that are sold up to 40% below current appraisal does nothing but hurt the legitimate sellers in the surrounding neighborhoods. Not only is it impossible to compete with the REO inventory, but recorded sales set new benchmarks for appraisals. The net effect is a complete re-adjustment of ‘fair market value’ for entire neighborhoods with only a few REO or short sale closings.
Even folks who are not selling at this time are affected, as any equity they might have built up is erased.