For the last six months the trend has become more and more apparent. The inventory of foreclosures held by banks is actually being liquidated! Prices are set at a level that many buyers make offers, terms become an important part of the offer, and in many cases prices are bid up over the asking price. Why are the banks taking this approach? It is my opinion that it is to move a massive inventory of foreclosures by keeping the days on market (DOM) as short as possible, while letting the market actually discover the true value of the home. The principles of auction sales are instrumental in the normal market sales of these properties. This strategy seems to be further verified in this article from CNNMoney.com. It also shows that this type of marketing is not only occurring in our markets of Indiana, Florida, and Texas, but on a large national scope.
How Best To Respond?
So, what does this mean to a buyer of foreclosures? My advise is make your best offer at the beginning. Low ball offers are not even being considered. Be prepared to hear the listing agent come back and request your highest and best offer. If this happens you will need to decide if you wish to increase your offer or improve the terms. Be glad you are getting this opportunity. It means you made the first cut of buyers. Oh, and just because you submit your highest and best, I have seen banks come back with really competitive properties, and do a second round of highest and best! Yep, an auction is what we really have going. A controlled auction.
We are receiving 15-30 offers at once on a property (seriously). We have to have a system to handle that volume. That system means confirmation of receipt of your offer that will come when we are processing it (in other words it might not come in the first 24 hours you submit the offer). Also, we are not providing daily updates. In fact, if we have nothing to tell you, that is exactly what you are going to hear. It does not mean we are not working hard to move the process forward. Please understand the banks are also struggling with this volume of offers also. When we get a response, we let you know immediately!