Since I often represent offers from buyer on REO’s it is hard to feel like the I am the only resource advising clients that “it works this way”. The media often only focuses on the street filled with home in neighborhoods that are overwhelmed with foreclosure activity. While there are a few street like that locally MOST of Ventura County has buyer who have been waiting to purchase homes and buyers are always surprised to learn what they will need to to to be competetive and how much competition there is so, this is a great post. I will be sharing it with other.

I think we are talking past each other? When I say more affordable, I am talking about REO properties specifically not the market in general as there are other complex economic factors that influence affordability market wide. Also the demand of the boom earlier this decade was not “true affordability” as the financing (liars loans) created a false market that eventually burst. Technically the REO market did not exist in the boom as prices and values and demand was so high properties could be sold before they even were foreclosed on.

I am not sure how much more empirical evidence I need on affordability when it is riding around in my car in the form of buyers writing offers; or the offers I see come in on my REO listings. The banks require proof of funds and I see daily what kind of savings the REO buyer market has on hand.

Why was demand so high if homes were not affordable in the boom? Now that is a whole other topic to discuss.

I just got back from 4 hours of panel discussions with asset managers at REOMAC at the Marriott in downtown Los Angeles. The entire panel discussion was about valuations and what the Asset Manager would like to see on the BPOs. There are a couple of industry conventions anywhere from 105% to 95% of the BPO value, but it really depends on the agent’s ability to communicate the hyper-local market conditions for the subject property and the condition of the property.

The fact remains that homes that are updated and in great shape sell quickly. Homes that have deferred maintenance take longer to sell and have influence on the declining market. I have only been in a few REOs in the last 18 months that were in good shape.

As a REO listing agent and an active buyer’s agent I see both sides. Affordability is there, buyers are very cautious is to what they will spend and thankfully that attitude is returning to the market.

As far as REOs and Short Sales Rising, I’ll post those numbers in another market update. Our total Simi Valley Moorpark inventory has dropped in number of units for sale by 40% from the beginning of this year and the percentages of what has closed as a Short Sale or REO is hard to track as the REO flag was just added at the end of April. The closed REO form June on 32-NOV, OCT-52, SEPT-45, AUG-39, JUL-48, JUN-36. The function of these numbers is more that many sellers are upside down and still can make their payments, or that many seller cannot get the price they want for their homes and will not sell at this time. The reduction of units for sale is tied to this. Bank REO inventory volumes should start decreasing for a short run and you need to see my post http://homebuysblog.com/2008/10/15/adjustible-rate-mortgage-reset-schedule/ for the explanation.

On the percentage…in November 65.63% of the REO sales closed at 102.39% of list price in Simi Valley. Those all sold in the first 30 days of the listing. In October more than 61% of the REOs sold at a little more than 100% of List Price. When I drill down to the indivicula properties it will be easy to show the best condition properties were selling far higher and 100 or 102% and the total fixers dragging down the averages.

If you are misinterpreting this as Realtor hype then you should read through my Blog, it is clear that I am pretty damn Bearish on the Real Estate market. Again the point of my REO discussions is that the banks are not kowtow-ing to buyer’s demands to give away property. If you see a REO you like…there might be several other buyers with the same feelings and what you thought was going to be an easy purchase is going to be a battle between who wants that particular REO the most.

One last word on anonymity, if you need your words to stand for something then they will need some accountability, that which anonymity does not provide.

“Those who stand for nothing fall for anything.”
-Alex Hamilton (UK)

I disagree a lot with this sentiment actually. Multiple offers in REOs alone isn’t a sign of strength or weakness nor affordability. We had multiple offers during the boom, did that mean prices were affordable? You have to look at the market and see the amount of REO & SS relative to sales, is that rising or falling? (Rising) You look at prices or REOs, do they have pricing power or are they trying to price low and have short marketing times? (no pricing power, low marketing times) The banks are basically asking the question “What can I do to make sure that whatever buyers are in the market are buying my home?”, that answer is of course price low and get it moved. The majority of bank homes in general don’t get huge markdowns off of list because the markdown is built into the price for most.

If we start seeing banks hold onto homes and hold out for higher prices (longer marketing times) then that would be a major shift in the market. But right now they get the BPOs, price aggressively (generally) and get the house moved. If the banks stopped pricing lower and lower you would see a very big slowdown in sales because buyers wouldn’t feel like they are getting a “deal” and believing you are getting a deal is a powerful motivating factor.

p.s. I remain anon because I like posting under different names because I like my words to stand by themselves and not attached to me directly.

1. I don’t bite.
2. Open discussion is good for all.
3. We can all take responsibility for what we say.

Thanks for the input, I will expand on how I hit that number and double check that I did not have a calculation error. One thing to note is that earlier this year our MLS did not have a REO-Bank-Owned field so there are many REOs that cannot be pulled just by the REO flag. There is a way to get those listings, but it is a very involved process to extract those sales.

Most REO listing agents have a hard enough time uploading more than one photo and more than one line of description, let alone fill out the MLS Broker load correctly.

Random…if I have an error in my calculation I will fix it!

I do want to thank you for helping me make a point, and that is the idea that the banks are at the mercy of the buyers and that they have to get rid of properties. If there is a “couple of percentage range” then that is evidence that these homes have become affordable. While the real estate market has a long way to go before it is in a recovery mode, the fact remains that REOs are receiving multiple offers, there are frustrated buyers and buyers agents and any buyer that thinks banks needs to give away a property, will be even more frustrated than everyone else.

Being the analytical type Random, I will dig through the MLS and post a more detailed report on the REO sales for Simi Valley this year. It will take some time this weekend as I have to pull the REOs that were listed before the REO flag was in our MLS.

Hmm? How are you calculating that? I just looked at this number today for simi with an agent friend of mine, You must have taken the Original list price and divided by the sale price or something else when calculating this because currently since June closings in Simi it is 95.7% average for Sale price divided by original list price for all closings with a REO flag set and 99.3% average for Sale Price divided by List Price.

There are home selling way over list (max 117% of LP in since June) and homes selling way under list (Min 55%) but realistically most REO sell within a couple percent of list because the banks are getting the BPOs and pricing below it to generate excitement and offers.

But nowhere do I see how you got that the average is 107% above LP

Thanks again for stopping by and for your comments.

The reform my industry needs, starts in Sacramento. We are under the California Department of Real Estate. Licensing requirements are too easy. Without being party to this transaction I cannot say if there some sort of dual agency violation or unfair business practice. That is something only you with your facts and evidence can make a case from.

There has been lengthy debate in my industry about the merits of dual agency and whether it should be allowed. Your situation, the way you relayed it, is definitely one of the reasons many think it should go away.

You are correct, this is the largest purchase of your life and the sad fact is that the franchise owners of a Subway Sandwich Franchise have way more at stake invested to open that business and have to qualify financially on a level that is astronomically beyond what it costs to become a Realtor. Ironic that the bar to make sandwiches is higher than to represent a buyer or seller with possibly the largest investment of their life.

I have not worked in the same office as Erik and have only had one transaction with him as the listing agent and myself representing the buyers. His staff is pretty large and the service was pretty typical of any large run organization. There were no problems with the transaction other than IndyMac not having clear title to the property and a delay in closing for a few weeks, but that was not Erik’s doing.

The risk that agents with larger layers of assistants run is that their clients will get a “Burger King” experience. I believe that my clients come to me for my expertise and not that of an assistant. I am the guy who has been in the trenches and the experience to handle all the issues that come up. No matter how great one may think their assistants are, an assistant will never replace the experience of a seasoned agent.

The great thing about this country is that if “Burger King” sucks, you don’t have to go back.

Good news is that the Simi Valley market has a long recovery ahead of it. You have time on your side unless you find that once in a lifetime dream home.