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Foreclosure prices
Old 08-05-2008, 10:20 AM   #1
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Foreclosure prices

I am looking at purchasing a winter vacation home and while researching the internet real estate listings, I noticed many foreclosures. My dilemma is the fact the price of homes has gone down while the lender wants the mortgage balance for the property. I do not necessarily have to purchase a foreclosure but are the savings and loan dreaming? Also how many homes can they afford to hold? I would think they are in the same shoes many homeowners are in; your house could be worth less than it was a few years ago. If you want to sell it, you might have to reduce the price.
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Old 08-05-2008, 11:34 AM   #2
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I've run into this several times when bargain hunting at the bottom of downdrafts. The banks let the properties sit, the lawns and landscaping dies or gets out of hand, the house has been sitting unoccupied for a year or two or more, and they want 20-30k than the house for sale next door.

In '96 when we were at the bottom of a 7 year slump I made several reasonable offers on some vacant foreclosures that had a few warts. The bank in both cases declined the offer, no counter, suggested I make a full price offer.

Ummm...NO!
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Old 08-05-2008, 11:48 AM   #3
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Make them a low reasonable (or not...) offer- include a page documenting the recent sales price of comparable homes in the area (easy to find on Zillow, or county records) Many lenders are still in denial about declining values, but they also don't want to be in the RE business.
I have heard that some of them have started unloading properties and are sending 1099's for the sales price difference to the borrowers.
Only one way to find out...
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Old 08-05-2008, 12:58 PM   #4
 
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The realtor that we are working with in NM told us that he has made offer for foreclosed homes on behalf of clients but the banks have no sense of urgency to close the sales and in most cases take many months to make a decision and by then it is too late for his clients.
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Old 08-05-2008, 02:05 PM   #5
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Having purchased several REOs, I've come to the conclusion that the "court house steps " auction is a mere formality (no bargins there). The bank will hold out for the full amount owed. Also beware of the realtors ... they're in the game for a bigger fish - either refuse to present the offer or will try to pull the offer up (not always in the best interest of the client/bank).

So the best way to shop these things is to deal directly with the bank. Pre-internet era I would cold call the bank and ask for the REO listing or REO department. Negotiated my best deals directly with the REO manager ... complete with special financing (.5 pt lower rate) and repairs (deleading mainly) built into the deal. Post internet era the listings are available online. Your first deal or two will involve a realtor, but once they figure out who you are, the realtor can be cut out.

I agree the urgency is just not there for these banks yet. Easier for them to keep their heads in the sand and pretend the values are still inflated (makes the books easier to cook). It'll take a few HARD lessons (major losses due to theft or fire) before they realize thier risk exposure. Remember, they mangage money not real estate.
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Old 08-05-2008, 02:12 PM   #6
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Quote:
Originally Posted by cute fuzzy bunny View Post
I've run into this several times when bargain hunting at the bottom of downdrafts. The banks let the properties sit, the lawns and landscaping dies or gets out of hand, the house has been sitting unoccupied for a year or two or more, and they want 20-30k than the house for sale next door.

In '96 when we were at the bottom of a 7 year slump I made several reasonable offers on some vacant foreclosures that had a few warts. The bank in both cases declined the offer, no counter, suggested I make a full price offer.

Ummm...NO!

Which is real funny... because when I was a trustee for bonds holding singe family housing... we would sell under market no matter what the loss to move the inventory.... but we did have a lot to move...

There was one neighborhood where half the houses were forclosed and my trust had about 10% of them... we would undercut the others just to move it... it cost money to hold... and 'we' were not clinging as some homeowners like to be... thinking their home is worth a lot more than reality...
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Old 08-05-2008, 04:53 PM   #7
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Quote:

we would undercut the others just to move it... it cost money to hold... and 'we' were not clinging as some homeowners like to be... thinking their home is worth a lot more than reality...
Just begining to see a little of this now ... HUD caused a couple bidding wars by under bidding the market. But owner occupacy is a requirement so I am on the side line.

PS. I am guessing you're refering to the 1991-1994 era. I expect we'll see those times again.
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