What To Offer On A Phoenix Bank Owned Home?
February 14, 2009
REO properties sell at a discount so what can you offer on a bank owned home. The answer is not so simple.
Banks need to move homes of their book. For them this is a liability not an asset. Does this make them more motivated, especially since there is no emotional connection to the property? What discount do you expect by buying bank owned homes?
These banks are motivated to sell and they do sell for below what normal homes sell for but, lender owned properties is the market now. 68% of all properties sold were lender owned and an additional 12% were pre-foreclosures and these in part are controlled by lenders since a sale requires their approval.
The REO's are the market and the banks are slowly catching on. Let's look at the break down of normal, pre-foreclosure and lender owned sales in Phoenix: we see that:
Normal Active $206.70
Pre-Foreclosure Active $98.90
Lender Owned Active $65.05
Normal Sold $154.31
Pre-Foreclosure Sold $108.72
Lender Owned Sold $59.12
So lender owned homes are priced already lower then normal properties. The lower price reflects motivation and condition. Not all homes are priced below market but, it's note easy to guage proper pricing now.
Lender owned properties that sold go for $59.12 per square foot while Normal sold are $154.31
REO homes sell for 91% of their list price for a discount of 9%. In particular some properties sell for much less then active price and others actually sell for more. So the answer is not that easy. Each market segment and each property type need to be taken into consideration. There is no rule for how much less they will accept.
The REO are actually in a stable market. I don't think the lenders realize it yet but when they do pricing may be more firm. On the other hand 2009 is the year of foreclosures so more properties will be coming on the market as REOs.
To concluded: you do get a discount buying REO's, they are often below replacement cost (newer homes can be as low as $40.00 per square foot ), they do often need some work and prices are negotiable, sometimes down, sometimes up.
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