San Diego Home Foreclosures Up 66%
San Diego home foreclosures
Dataquick of La Jolla, reported that San Diego County June notices of default were up 66% over May. But, the number of default notices were down 11% from June 2008.
John Walsh, President of DataQuick said: “There is a perception that the housing market is dragging along bottom, that it probably won’t get much worse, and that the lenders need to get serious about processing the backlog of delinquencies, either with work-outs or foreclosure. We’re hearing that some lenders and servicers are doing just that, hiring more people to do the necessary paperwork. That means the foreclosure numbers will probably shoot back up during the third quarter.”
San Diego Home Foreclosure Ploy
San Diego housing market
In the San Diego housing market the undisputed hottest selling properties are bank-owned, foreclosed homes and condos.
Many San Diego home buyers are exhibiting characteristics of the famous Alan Greenspan term, “irrational exuberance.” Use of the terms, “bank owned,” “bank foreclosure,” “lender reposition,” “foreclosure sale,” etc., are sure to draw a crowd to view the property. If the property shows half-way decently, there will be offers, and sometimes multiple offers.
Adding my observation to the above facts, a number of lenders have hit on a marketing ploy to create a buying frenzy which guarantees an almost instant sale. In the majority of cases the offer(s) exceed what may have been realistically expected if the property was marketed the traditional way.
Here are some actual examples of this technique for San Diego home sales.
- On 4-8-09, a bank owned home in east Carlsbad was listed at $499,900. Based on the location, age and size of the home, I estimated the current value at $575,000 to just over $600,000. Within one day of the listing, the listing agent had multiple offers. According to the agent, the lender required it to be on the market one week before they would look at any offers. The agent speculated that based on the number of inquires, she would have 40 to 50 offers in the one week period. This home sold for $597,000. The sales price was almost 20% over the listed price. Doesn’t a sale of $97,100 over the listed price suggest that it was listed way under the market?
- A bank-owned Little Italy one bedroom condominium was listed in March for $234,900. The estimated fair current value for this condo was approximately $275,000 to $280,000. The listing agent stated that within 3 hours of the MLS listing being submitted, he had an offer. Again, the lender would not look at any offer until the condo was on the market one week. This San Diego property generated 21 offers within the 1st. week, of these, 11 were at or above the $234,900, listed price. This Little Italy condo sold at $295,600, or $60,700, approximately 26% above the listed price! I was told the accepted price was $15,000 above the next highest offer.
- A San Carlos planned-unit-development, bank-owned 4 bedroom was listed at $344,900. The estimated fair value for this condo was approximately $410,000 to $425,000. Inside of one week, this San Carlos property had an accepted offer at $410,000. This was approximately 19%, or $65,100, above the listed price!
Banks are purposely under listing property with the strategy of creating a buying frenzy to result not only in a very quick sale, but, a sale at or above the fair market value. Is this practice fair or even legal? It is on both counts. If the bank does not list it properly, they could end up with a sale way below the current fair market value. On the other hand, it isn’t fair to neophyte buyers/agents. Buyers and/or their agent who do not recognize the ploy, may be wasting quite a bit of time writing offers that in some cases, will not even be considered or countered. Also, what about shattered expectations? A number of buyers/agents may honestly believe that their full price offer has a chance of being accepted. In reality, they not only have zero chance of getting their offer accepted, but in the majority of cases, they will not even get a counter-offer.
So what is a potential buyer looking for a bank owned property bargain to do? If they are smart, the best advice would be to seek out an experienced agent and implicitly follow that agent’s advice.