Over the last six months the attitude of the banks selling REO (foreclosed properties) in Carmel, Pebble Beach, and Carmel Valley has certainly shifted. Initially, as the foreclosure wave began, the banks treated all foreclosed properties in much the same way. The key criteria was speed of sale. The banks would price the property to sell and hopefully even close escrow within 30 days of listing. Recent Carmel foreclosed homes range in the number of “Days on Market” but the higher priced homes are now on the market twice as long, or longer, as the lower priced homes.
Higher priced REO homes face the same issues as all higher priced homes, the limited loans available for purchase at price levels above $800,000. But that doesn’t explain the shift entirely. What appears to be happening is a combination of the following:
- Banks are waking up to the fact that they are their own worst enemy. By discounting REO homes and using the “price ‘em, stack ‘em and sell ‘em” approach they are driving neighboring values down and forcing additional borrowers into foreclosure.
- Most banks have decided to shift their focus on “high value assets” towards maximizing the value, or “retained value” of the asset.
If you are buying an REO home in Carmel, Carmel Valley, or Pebble Beach you should be aware of the following impact of this shift in strategy:
- Properties used to appear in the MLS within days of foreclosure. It now takes as long as several months before the property is listed.
- Initially banks would at best provide the buyer with a termite report. Now, on most of these high end asset homes on the Monterey Peninsula the selling bank is completing the section 1 work before close of escrow.
- Banks will still consider paying a portion of closing costs, but the buyer’s agent must make sure that the bank’s commitment to pay those closing costs survives each of the counter offers.
- In some cases, banks are undertaking some cosmetic repairs before putting the property on the market. Most are also making sure that there are appliances, bathroom fixtures, etc.
- And, finally, as has always been the case, once the list price is set the bank typically switches to a formula for responding to offers. So, if the bank makes an error in pricing it may take months to get down to market value, no matter how eloquent the argument is supporting your offer.
