Recently we are noticing an interesting shadow of the 2005 bubble that we saw here in Lake Shastina. Those four years ago had bidding wars over asking-priced properties and buyers were lined up with offers, some all cash and with no or few contingencies.
Well, the same is happening again but the price scale is reversed. Homes in the $100,000 to $150,000 price range are in the bulls-eye now. The asking prices are tens of thousands less than five years ago and buyers are bidding against each other to grab the deals (or steals if you want to be pickey).
Actually, it's more like a silent auction because the buyer and his or her agent do not know what the other bids (offers) are, the sellers agent is not supposed to reveal that. Instead you hear things like "have your buyer make the highest and best offer he or she can". That's a clue that there may be other offers on the table and that they might be strong ones.
So if you represent a buyer as we did in a recent deal you try to explain that this is not the typical slash and burn purchase procedure of making a low ball offer because many of these homes are now owned by banks and not only do banks not like to bargain, they have other buyers pounding on the table. In short, they don't NEED to bargain.
Quite the opposite, the seller is now the boss and not the panicky private seller who is facing a possible forclosure. This is where it's so reminiscent of 2005 when private sellers could command full asking price and even more. But REO's as bank-owned homes are called are in no danger of being foreclosed upon as some private sellers are today, in a sense they already have been. So the pressure on the seller is gone. The bank lists the home for what is owed on the loan or even less and lets buyers compete for the sweet deal that results.
But back to our buyer: all cash, 30 day escrow, no loan or any other contingencies. And what do we get back as a counter offer? Actually, better than we expected ..... the bank tried to shorten the inspection period to five days from the standard 17. That's it. And that's another signal. We had the best hand on the table. Once we agreed to those terms (actually, we countered 10 days just because LSPOA might not be able to get the homeowner packet out in 5, but the bank accepted that) the deal was struck. Once the bank signs our offer and their own counter we open escrow and the ten and 30 day clocks start.
It took some doing for our buyer to find a lender who could put together an FHA loan in 30 days though. Wait a minute you're saying, this was an all-cash deal, what loan? Well, it is a cash deal, the buyers family will step in and cash out the escrow and be repaid by the loan soon after. The buyer will then enter a private loan deal with the family on very favorable terms.
So there you have it. A nearly new 3b 2ba 1400 square foot home for under $130,000. A scary thing for pre-owned and even new specs but until this REO inventory comes down to the 6 month level here (it's 22+ months right now), this is how the market is working here.
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