St George, Utah Real Estate Blog

09/01/05

Today’s real estate numbers:

• All homes for sale on the MLS: 567
• Homes pending (under contract): 868
• Median asking price: $373,750
• Average mortgage rate: 5.26%
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How to find homes for sale that are priced less than a foreclosure

Part 1

If you were to ask the average person what the cheapest homes for sale are, they would probably say a bank foreclosure. Actually, in hot market that’s incorrect.

Why?

When a bank takes back a home due to foreclosure, they spend a lot of money find out two things; 1. What is the actual real value of the home? 2. What is the local real estate market like?

Home values and market conditions are usually provided by three people; two real estate agents and a real estate appraiser. The appraiser provides the bank’s REO (Real Estate Owned) manager with and appraisal. The real estate agents provide the REO manager with a “Broker Price Opinion” (BPO). A BPO is an educated estimate of value arrived at by using three similar for sale homes and three similar sold homes. In exchange for providing a BPO to the bank, the agent is paid $50 to $75 and the agent will sometimes be asked to list the foreclosure.

With those two bits of information in hand, the bank’s REO manager will make a decision on where to set the asking price.

If the real estate market is strong then the REO manager will set the price at slightly above market. In a strong market the bank will rarely come down to far off of their original asking price. They don’t have too because they know the home will sell even if it needs work.

If the market is slow / soft then the bank will still price the home at market value, but will look more favorably at reasonable offers. On average in a slow market you can expect a bank to come down as much as 15% off asking price if the home has sat unsold for more then 90 days. If the home just came up for sale be prepared to pay full price for the foreclosure even in a soft market.

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More information:

Investing in Foreclosures: For Novices it's a Crapshoot - Getting rich from buying foreclosures is the fantasy of many Americans, but it's much like most other things that seem too good to be true.