Are Bank Repos, Short Sales or REOs More Likely to Negotiate?
I recently had a conversation with one my clients regarding a bank owned property he found for sale on our website, while searching our Placer County bank repo and REO page. He wanted to know how much wiggle room there was in the price, considering that it was a bank repo. I have also had a few conversations recently with other Realtors about bank repos, short sales and REOs (Real Estate Owned Properties), and have received some second hand reports about the troubles that Realtors who specialize in bank owned properties are having. These conversations, along with my need to know the ins and outs of the local real estate market, have lead me to ask the question, will banks negotiate a better deal than the average seller?
Between 7/02/06 and 01/02/07 36 Placer County homes in the MLS sold that were either bank repos, short sales or REOs. That is an average of 6 bank negotiated properties sold per month.
There are currently 176 bank repos, short sales or REOs listed for sale in Metrolist MLS for Placer County. If you take the 176 listings for sale and divide that by the average of 6 sold per month, you will find there is a 29.33 month inventory of bank repos, short sales and REOs. At the same time, there is a 7.6 month inventory of Placer County homes for sale in general, as calculated in our most recent post for Placer County Home Sales.
On average, banks received 97.7% of their asking price for the 36 properties sold in the last 6 months, while the residential market as a whole in Placer County received 96.68% during the same period. This means that on average Placer County sellers took 3.32% less than their asking price during the six month period, while banks only took 2.3% less than asking.
The greatest percentage discount and dollar discount in asking price that a bank accepted during the past six months in Placer County was 8.53%. This was on a home on Diamond Oaks in Roseville that was sold as a short sale, where a $429,000 offer was accepted after asking $469,000. That is the maximum discount in asking price that a buyer received during the six month period for a short sale, bank repo or REO in Placer County.
The average discount that buyers were able to negotiate on short sales, bank repos or REOs was $9,688. In the month of December the average discount negotiated for all homes sold in Placer County, bank owned or not, was over $18,000.
11 of the 36 short sales, bank repos and REOs actually sold for at or above their asking price.
These statistics have made it pretty clear for me that a buyer should not expect to negotiate a better deal with the bank than with any other seller. On the contrary, it has led me to believe that you have a better chance to negotiate the price down with a seller who is not a bank.
This also explains why so many short sales, bank repos and REOs are sitting on the market and why they are selling at a pace 3.8 times slower than the average Placer County home.
This doesn't take into account how well priced the properties are before an offer is accepted and that may be a reason why they are less willing to negotiate. But, if they were well priced to begin with, they would be selling at a faster rate. The fact that there is a 28.9 month inventory of these listings is enough evidence to show that they are overpriced and that banks should either lower their prices or accept less when offers are made.
The reluctance of banks to lower their prices and accept lower offers is a sign to me that they think the market will improve sooner rather than later. However, I may be giving them more credit than they are due and it may be because they are understaffed, lack good information or are reluctant to take action. I hope that it is because they are betting on the market improving.
My gut told me that the numbers would work out this way, but all the years of infomercials and investment books made me question the obvious. I like many others believed at one point that bank owned properties were an opportunity to find a property at a discount to the market rate. The reality is that they are not negotiating their prices any more than other sellers. So, if a bank owned property does not look well priced to begin with, a buyer should not expect to have a "low ball" offer accepted. There is not a lot of wiggle room with banks and they will not negotiate a better deal than the average seller.
If you would like to view an up to date list of Placer County bank repos and REOs, click Placer County bank repos and REO for sale. If you have a home that you would like to sell that may be a short sale, please feel free to call us at 916-728-1981, e-mail us at firstname.lastname@example.org or leave a comment below. We would love to help.