Market Insights: Bank owned: Deal or no deal?
Real estate brokers in Summit County hear it day in and day out. A prospective buyers walks into the office or calls us from, for example Las Vegas, and says they are looking for a bank owned property that is a deal. Well it’s not that easy here. There are three factors, in this regard, that make our market very unique.
First – On a relative bases there are just a handful of bank owned properties here. Based on my last calculation less than 1 percent. Compared to nearly every other market in the U.S. this is nothing. This translates into the fact that is not very common that your real estate broker will find you that ideal property you have been dreaming about which is also bank owned.
Second – In many markets such as Las Vegas, Phoenix and Atlanta, the banks own so many properties that they are not even trying to sell thousands of them. And they have good reason. In those and similar markets the banks know that placing all their inventory for sale will flood the market and push prices even lower. In real estate circles we have a term from this – ‘shadow inventory.’ Not the case here. How does this impact Summit County? The banks are not ‘giving away’ properties for prices way below the market value. This is one market they can make an extra buck. In my experience negotiation with banks here (several in 2010) I have found the banks are fighting over amounts as small as $1,500. It seems they want to make up for their loses in other markets.
Third – It is different here and the banks just don’t seem to get it. Different you ask? Yes. For example it is cold in October, many properties have septic systems and it snows. These three examples seem obvious to you and I but if you are a banker in Dallas that is dealing with thousands of properties located all over the country it is harder to grasp. Got to love this one – early in 2010 I represented the buyer of a bank owned house in Blue River with a septic system that was frozen solid, like a rock. Once we agreed on the terms of the contract the bank demanded we close quickly. No matter how hard we tried they could not understand it is not possible to test and examine a frozen system. How did we get it closed? This first home buyer went out to the property for days, dug the snow away then hung a heating element into the tank for hours at a time till it was melted and could be tested. That is the sort dedication required when dealing with banks.
So: Deal or no deal? Often a deal but not always. You must be super patient, be willing to do all the work involved in the sale and know that what might look like a great value on paper is not aways what it appears.
I had a client close on a bank owned property in Breckenridge yesterday. Here are just a few of the issues: no appliances, a useless hot tub that will be costly to remove and damage from frozen pipes last winter. But at way below $200/sq. ft. my client is very, very happy.
Daniel Webster Johnson is a broker associate at Resort Brokers Real Estate. He can be reached at (970) 393-3300 or at daniel@YourMountainBroker.com.
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