Banks getting it right??

Are banks finally getting smart? Are they finally realizing a better strategy for getting foreclosed homes off their books?? Its looking like it. The Minneapolis Area Association of Realtors (MAAR) put out a report yesterday with statistics indicating that banks are now receiving a higher percentage of the original asking price than traditional home sellers are. It seems that the St. Paul Pioneer Press has now picked up on the story.

This bank strategy is old news to me, its something banks have been doing since the beginning of the year. There is an agent in my office who deals more or less strictly with foreclosures. The banks he works with have had great success with this strategy. In fact he listed a house last Saturday in St. Paul's east side, priced at 84k. By Monday afternoon he had 100 showings that had either already taken place or were to take place in the next day or so. Monday morning he had 6 offers in hand, last I heard he had 28 offers, everyone of them over list price. He has seen this happen over and over this year, he had one earlier this year that was listed at 40k and ended up selling for over 100k. I too have experienced it, only on the buyers side. I had a client last week put in an offer on a house listed at 37k, my client made a strong offer (significantly above asking) and the house sold for 104k.

I personally think its good news. It will keep the foreclosed homes from sitting on the market, vacant and useless, for long periods of time. Not having a backlog of inventory will eventually help the traditional sellers as well.

Speaking of traditional sellers, some may be wise to use this approach on their own home. I saw it work on a home that another buyer of mine was looking at, they priced it 20-25k below market and got multiple offers after being on the market only 5 days. Now I don't know what the final sales price is on it so it may be even lower which, other than selling it quickly, kind of defeats one of the purposes of this strategy (creating a bidding war). So maybe a traditional sellers prices it 50-60k below what they really want and see what happens. The only trouble there is that now they can't go and raise that asking price without having some sort of backlash from the market. It would take the right seller to take the risk, and I sure wouldn't want to be that agent who pushed for my traditional seller to take the risk and have it end up not working.