It is Monday after a long Thanksgiving Weekend, dubbed “Cyber Monday” by the marketers with their fingers on the pulse of retail activity. The last of our three children who were home for Thanksgiving left this morning to catch an early flight back to San Francisco and the afterglow of the family time together is dissolving.
During the visit we learned of friends of our now-grown children, post college and beginning life in the “real-job” market, who have bought homes recently. Four years ago parents of my age would lament, “How will our children ever be able to afford a home in Southern California?” Now, after three years of falling prices, it looks like they can! That’s the bright side of the downturn. Of course, if they expect to start with a newer three bedroom home with granite counters and an ocean view, that probably won’t happen.
The local beach newspaper today contains a full page ad by one of the nations largest homebuilders with the bold headline “Foreclosures are Risky Business…with no customer service, no financing assistance and no warranty you never know what you’re going to get.” They go on to list their housing projects currently selling in Southern California and add that they are “priced to compete against foreclosures.” It’s a candid admission of the fact that foreclosures are setting the tone of the market.
My headline would suggest: Foreclosures are Tricky Business. The risks of “not knowing what you’re getting” can be offset by thorough due diligence and inspections. The tricky part is actually getting an offer negotiated and accepted. Many bank-owned properties are being offered at prices well below market value in order to spark a bidding war among competing buyers. In the last month I have represented offers on bank-owned properties in which one had fifteen offers and the other had eleven. Buyer’s were instructed to submit their “highest and best” offer by a deadline…and then wait for notification of acceptance for the “winner.”
This may be a smart tactic by the sellers, but it can be extremely wearing on the buyers and their agents. Imagine that for every accepted offer there are ten buyers and agents who did the drill of finding and inspecting the property, arranging financing, getting approval letters, drafting the offers and getting signatures, relaying all the paperwork, making the calls, setting the appointments, etc. And in the end the buyers are pitted against each other in a bidding war in which the price is an unknown characterized by the listing agent as “higher than asking price.” All for naught. This is a recipe for frustration.
Fortunately, there are several strategies that can be used by savvy agents to expand opportunities and create success for buyers in this chaotic market environment. Stay tuned for more information on how to navigate the mine-field that is the foreclosure market. And meanwhile, enjoy the entrée to the holidays that is the month of December!