Ask any home seller today or experienced real estate professional if they would ever see a scenario where a home, staged and priced below the market, wouldn't sell.However today, that's the case with a lot of homes in the Charlotte real estate market. A pattern has occurred where home buyers have bought into the hysteria and theatrics that the only good deals in town are bank owned foreclosures; which simply isn't true. Having sold more than my fair share of bank owned homes over the last few years, I can personally attest that most buyers have a idealistic vision of their dream foreclosure. The home is in perfect condition (not even a scuff on the wall), all of the appliances are installed, and the home can be purchased for half of the asking price. As things progress, that same buyer undergoes a reality check when they discover that bank owned homes have lots of deferred maintenance, the appliances are gone, and the bank is holding firm at their market value price.
Many think that auctions are the way to go, rationalizing that the banks are just unloading these properties for pennies on the dollar. Again, having worked with a client who purchased a bank owned home through a large auction, I can say that the discount was really non-existent given the condition of the home. In fact, the auction pressured the buyer into closing whether he liked the home or not so that he wouldn't lose his $25,000 in earnest money and up-front fees.
This past weekend, I happen to turn on our local public radio station to catch a show "This American Life" and a story about the final days of Circuit City. Much of what the former managers and employees described in the story regarding prices and discounts is exactly what we see in the real estate business regarding REO's.
Here's a link to the story so that you can listen for yourself but the long story short, the liquidators raised the prices on every item in the store because they knew shoppers would see "liquidation" and think "discount." Since foreclosure homes are the latest rage in the market, the banks are able to use the hype to keep prices elevated for a higher return for themselves.
For the right buyer, bank owned properties can be an excellent opportunity to obtain a home, sometimes below market value, and to build equity.