Banks less likely to budge on home prices Online Real Estate Investment Mortgage Glossary

18
Jul

Banks less likely to budge on home prices

An analysis by Redfin.com shows that bank-owned homes and short sales consistently sell for closer to their list prices than do non-distressed homes. . Redfin trend watcher Tim Ellis writes:

This held true across every price band, although the volume of distressed sales is certainly weighted toward the low end we were originally only going to discuss [bank-owned homes] in this post, but the sale-to-list ratios for short sales were so similar that we decided to include them in our analysis as well.

The study includes homes in 16 markets, including Irvine, where distressed sales were at 42% of total home sales. You can see the sale-to-list ratio in the chart above.

At one point, Ellis cites a Redfin agent in Phoenix, Marcus Fleming, who says:

“Banks are very careful about getting a number of BPOs [broker price opinions] before listing a home. When it goes on the market they are so confident the price is right that for the first 2 weeks they will accept nothing but offers at 100% of list price.

Fleming says even when the home has been on the market for several months, banks won’t consider offers for less than about 95% of the list price.

Ellis says:

In general, the more distressed a market is, the bigger the difference between the two sale-to-list ratios. In other words, in a highly distressed market like San Diego, buyers are a lot less likely to get a bank to negotiate on price than they are in a less-distressed market like Denver. Admittedly, the correlation isn’t incredibly strong, but there is definitely a clear trend in that direction.

In some markets, banks are being especially aggressive with their listings, putting homes up for sale at well below the market value, leading to multiple bids and average sale prices that are higher than the list price. Across the entire data set we analyzed, distressed listings were more than twice as likely to sell for over list price than non-distressed listings.

More details here

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