"First Come, First . . . Wait??"

Can Bank-Sellers Be Choosers?

Days 0-7: No offers considered. 8-12: Offers considered on property ONLY from NSP buyers, municipalities, non-profit organizations & owner occupant. 13+: All offers considered from all buyers.

--Excerpt, foreclosure on MLS

With the caveat that I don't specialize in foreclosures, this is the 4th time in as many weeks that I've seen a variation of the language shown above ("NSP" refers to "Neighborhood Stabilization Program").

What's going on?

Typically used in conjunction with a deeply discounted price, the bank's strategy appears to be two-fold: 1) accumulate multiple offers; and 2) segment prospective offers by "more" and "less" preferred categories.

"First Come, First . . . Wait"

If so, it's going against the grain of how real estate is normally sold -- namely, "first come, first served."

Put it this way: a significant percentage of the time in real estate, the first Buyer is the best buyer.

In this case, however, the bank-owner is explicitly telling that Buyer -- at least if they show up in the first week -- that they need to cool their heels while other prospective Buyers (possibly) join the fun.

I can imagine at least a few such Buyers responding, "No, thanks."

At the very least, it's hard to imagine any sane Buyer submitting an offer before Day 7, when they risk having it shopped to other Buyers.

From the bank's perspective, the ultimate test of such a strategy is whether it actually increases what the property sells for.

I suppose if more foreclosures start popping up with this language . . . the banks think the answer is "yes."

P.S.: Is is kosher (legal) for the banks to define which Buyers they'll consider offers from -- and when?

As long as they're not discriminating against protected classes (race, religion, etc.), I would assume that they can.

Revisting 1415 June Ave.

Want to Sell This One?
Help Defray Property Taxes

I originally posted about 1415 June Ave. -- in Golden Valley's South Tyrol Hills neighborhood -- last Summer ("$700k Below Tax Value").

At the time, the asking price was $799,900 -- against a tax assessed value of $1.504 million.

Thanks to that latter number, the home carries an almost $24,000 annual property tax bill.

Which likely explains why it's still unsold almost six months later -- and the asking price is now $784,900.

Unsolicited Advice

You'd certainly expect the property tax bill to drop dramatically once the home sells so far below its assessed value.

However, it's not a slam dunk.

That's because tax assessors consider foreclosures to be distress sales (true), and therefore not necessarily reflective of fair market value (patently false).

Put it this way: if anyone thought 1415 June was worth more than $784,900 . . . . they've now had almost two years to snatch it up (the home originally came on the market in March, 2009, at an asking price of $1.679 million).

To entice Buyers who can afford the home but not the attendant property taxes, here's my advice to the bank-owner: pick up some or all of the property tax bill for a period of time.

Sellers now routinely pay up to 3% of Buyer's closing costs.

In this case, what the Buyer really needs help with -- at least temporarily -- are the property taxes.

From $550k to . . . $166k

70% Off!

Where: 30xx Colfax Ave. South in Minneapolis' Uptown neighborhood
What: Uptown Triplex with 2,700 FSF
How much: $166,250
When: listed yesterday (9/30) with Coldwell Banker Burnet

Once upon a time -- like 2006 -- this Uptown property was listed for $550,000.

Today, it can be purchased from its bank-owner for $166,250.

It comes with a $7,000 property tax bill, but since that's pegged to a tax assessed value of $398,500, you'd certainly expect that to drop.

Sold! . . . Not Sold! . . . Sold! . .

Back on the Market Twice (in 10 days);

Third Time's the Charm?

The image I have in my head for this St. Louis Park foreclosure is a traffic light, alternately blinking green, then red, then green, etc.

That's because in less than 2 weeks on the market, it's already gone "Pending" twice, and each time has quickly come back on the market.

What's going on?

Be Careful What You Bid For

Given the price, $89.9k, location (just Southeast of 394 and 100), and the fact that it's a foreclosure, you'd certainly speculate that an overeager Buyer won a (presumed) bidding war, then either couldn't perform financially, or, re-did their math after carefully going through the home -- I did last week, and it's a total mess -- and reconsidered.

After all, foreclosure Buyers have been known to bid first, and do their homework second -- if and when they actually get the property.

It's also the case that sometimes condition is irrelevant, because the home is a tear-down. However, given the limited upside on the immediate block, I don't see that happening here.

Yet another possibility is that the bank dropped some bomb on the Buyer in the custom contracts it routinely substitutes for the standard Minnesota forms everyone else uses.

Possible, but less likely given that banks typically sell "As is," and provide no disclosure whatsoever.

So which of the above is it?

To paraphrase that old commercial for a hair color product ("only your hairdresser knows for sure"), in this case, only the listing agent knows for sure.

Changing Sales Mix Blurs Housing Price Changes

2010 Housing Market:
More Toyotas (er, Chevy's), fewer BMW's

Confused by the cacophony of statistics purporting to describe today's housing market?

The root of the problem is that the statistics are really capturing two things: 1) the change in housing prices; and 2) the changing mix of homes that are being sold.

(The exception to the foregoing is the Case-Shiller index, which purports to isolate factor #1, changing prices, by only looking at "matched" sales pairs -- that is, the same house. However, Case-Shiller is susceptible to other weaknesses, at least in my opinion.)

Chevy's vs. BMW's

To illustrate the problem, imagine if auto sales were measured the same way as home sales.

In a recession, people buy more, uh . . . Chevy's; in good times, more BMW's and Lexuses.

That doesn't mean auto prices fall dramatically in a recession -- it means that economy cars are more popular.

Similarly, when bank-owned foreclosures dominate the housing market -- like in 2009 -- the "average" and "median" home selling prices fall, too.

That doesn't necessarily mean that home prices have dropped dramatically.

Rather, it means that smaller, less expensive homes are . . . smaller and less expensive.

Ignoring the Asking Price

Mispriced Properties: Exhibit A

Where: 46xx 1st Ave. South in Minneapolis

What: Bank-owned (foreclosure) 3 BR/2 BA 1917 stucco home with 2,000 square feet.

How (much): asking price -- $72,900; sold price -- $130,000

When: listed -- 4/19/2009; closed --8/18/2009

In my post yesterday (Seller's Motivation: Is it Relevant?"), I made the case that the Seller's motivation (usually) isn't nearly as important as most prospective Buyers think it is.

Often times, neither is the Seller's asking price.

At one extreme, Banks selling foreclosures have been known to price ridiculously low to foment bidding wars (at least, you'd assume it was purposeful; the other alternative is that they truly have no clue. Hmm . . . ). See Exhibit A (above).

At the other extreme, lots of Sellers today have been known to pick asking prices that reflect, shall we say, "wishful thinking."

Either they've been in their home for decades, and are genuinely oblivious to how dated it has become, or, they feel the need to "pad" their asking price, to give themselves "negotiating leverage."

Unfortunately, that's not how it works.

Realtors (and appraisers) know that home prices are set exactly one way: by identifying the 3 best Comp's (similar, nearby homes that have sold the most recently), then doing a detailed compare-and-contrast between the subject home and each of the Comp's to arrive at an adjusted value.