Beating the Bank
The glut of bargain priced, bank-owned homes in our area is making it tough for individual sellers to compete. But there is hope for those struggling to sell.
Monday, April 7, 2008
When my husband and I bought our first home a couple of months ago, we looked at a dozen or so houses. Every single one was bank-owned. It wasn’t a conscious decision – it’s just the prices were so much lower. But if you have to sell your house right now, that’s not the kind of thing you want to hear. Alan Waggoner is a Realtor in Elk Grove and President of the Sacramento Association of Realtors.
“In the real estate world as I sometimes will share with people, there’s always a reason for someone to sell, and that always reason is death, divorce and transfers.”
Waggoner says the toughest part of his job is convincing an individual seller his house is probably worth a lot less than he thinks it is:
“And when you say, but I’ve got 30-thousand worth of upgrades. I’ve got 100-thousand worth of upgrades. I’ve got gold-plated widgets in my house. No one cares that you’ve got a gold-plated widgets, because the bank is 20-thousand dollars less than what you think your house is worth. They can buy those widgets”
To prove the point, Waggoner and I do a little experiment. He checks the regular listings in Elk Grove. The average price is 447-thousand dollars. Then he does the same search, but includes bank-owned homes and short sales – those are the ones in pre-foreclosure. The total inventory more than doubles – and it knocks the average price down to 370-thousand dollars. The bank-owned homes have pushed the average price 80-grand lower.
Real Estate Agent Michael Freeman is doing what he does most Sundays: Holding an open house in this 3 bedroom Natomas home.
Freeman has staged the immaculate home; cookbooks on the counter, teddy bears in a pink bedroom upstairs. The problem is, he’s competing against a four-bedroom bank-owned home just two houses down. Even though that house is bigger, it’s being offered at 40-grand less.
“We have bank REO properties that are coming on, they’re trashed and they are artificially driving the price down, because it’s not really what the market would be bearing, but the buyer is going to take advantage of that.”
To be honest, that’s what my husband and I did. But our house was like many of the bank properties we saw: Baseboards and closet doors stripped off, holes in the nicotine-stained walls, bird poop on the kitchen floor and mold growing under the sink.
Freeman and I decide to check out the bank-owned home down the street to see what shape it’s in....
There’s stained carpet, crayon drawings on the walls, and a stove caked with grease that’s beyond salvaging. But that smells like opportunity to Patricia Galdamez who shows up for a tour. She says her husband can fix it up:
“It take time for him, because you know, working overtime and blah blah, but if we can do it, I just say, we can save a couple thousands.”
But there is hope for individual sellers. Agents Freeman and Waggoner say they’ll have to be realistic and lower their prices. But a furnished, spotless home will always show better. And then there are buyers like Jesse Monnier – who’s willing to pay a little more for a home that’s in better shape:
“You know, all this free time for renovations, I just don’t have, and so by the time I had time to make the renovations, I’d still have to live for three years in someone else’s yuckiness and I’d still just rather not.”