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Joe Mammy

Beach Lover
Mar 26, 2007
140
40
"Give me your highest and best!" What is that, you ask? The answer is the most common phrase in today's REO market in the greater Destin area. Those of you who have been reading my previous market pulses know that REO stands for "real estate owned by the bank" and is the term for foreclosed property listed on the active market by the lender.

REO's have been the hottest sector in the local real estate market and have been dictating overall market value. Most come on the market at very attractive prices and create instant sizzle. Agents scramble to notify their clients and then rush to submit an offer- usually within the initial 5 day active period. The bank will collect offers during the 5 days and then all who have submitted an offer will be asked for "their highest and best". In essence, what we then have is a silent auction.

The bank will look at not only the offered sales price but will weigh any contingencies such as financing terms, length of contract to closing, requested seller's concessions and negotiable closing costs. I have been on the winning side of these auctions where my client came with a full price offer and I have been on the losing side when I have had clients offer ABOVE list price.

Let's take a look at 2009 sales for combined residential (single family, condos and townhomes) in the greater Destin area. Total sales we find 769 closed transactions. Of those 769 how many were REOs or short sales and how long were they on the market:

REO sales: 131 or 17% with an average 71 days on the market

Short sales: 122 or 16% with an average of 239 days on the market

What screams at me is the almost 8 months to close a short sale! They are purposely listed at below market prices to invite offers. And then the waiting game begins. Most buyers do not have the patience to wait for the bank to make a decision. And the answer might end up being a counteroffer instead of acceptance. The REOs while also listed at offer beckoning prices do close much sooner. But that only tells half the story. We need to compare the current active listings as of today (9/17/09):

Total actives for combined residential (single family, condos and townhomes) - 2769 of which only 28 are REOs and 381 are shorties!

Only 28 active REOs. Yet we have 381 active short sales. What will happen to those short sales that do not go under contract? You guessed it, they will be foreclosed upon and then become REOs. Typically, an REO will come on the market and if it is not sizzle priced the bank will reduce steadily every 30 days until they reach the sizzle point when multiple offers roll in. Then the call comes from the bank's listing agent, "We are in a multiple offer situation. Please give me your highest and best offer by 5:00".

Let the silent auction begin! :D

I could not post tables here but I have them on my site.
 
Great write up. I just went through this in Destin. Full price off with no contingencies. The bank got 4 offers in 3 days and we lost. I personally see the short sales as a violation MLS rules seeing as how their is no guarantee that the bank will accept that prce.... even if it is a cash offer with no contingencies.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
I've read all of the rules in the MLS and don't see one which it violates. W hich MLS rule in particular do you think it violates, livinginsowal? If it is a rule violation, report them to the MLS Committee, along with the rule in violation.

The seller agrees to sell the property at "price x," not the bank. The bank simply decides whether or not they will release the lien on the property, since it is their money which is at risk. So, the contract is contingent upon the lender. I know it is all semantics, but in Florida, the lender doesn't own the property, the deed holder owns the property. (I'm not talking about REOs where the lender DOES own the property.) If the seller lists the property at "price X" and a buyer comes in an offers "price x" and the seller doesn't accept the offer, THEN, you might have a valid case and the seller may have to either be forced to perform or pay damages, and may also be subject to paying commssion, even without a sale. However, you won't see that happening in short sales, if properly listed.
 

fisher

Beach Fanatic
Sep 19, 2005
822
76
What is an "As Is" listing? Is it similar to a short or a foreclosure?

I've seen numerous as is listings and I believe most of them were unfinished homes. However, I just saw three or four AS IS listings in Alys that seemed to be completed and even furnished homes.

Just curious.
 

TooFarTampa

SoWal Insider
As is= From my experience, it means the seller is not responsible for any repairs. In this case the buyer may require a contingency where the sale is subject to a satisfactory inspection, but the typical 1.5 percent of the sale amount for repairs does not apply.

Translated, I think most sellers are saying they are over it and dont want to deal with anything else. ie Take it off my hands, please. :dunno:
 

Joe Mammy

Beach Lover
Mar 26, 2007
140
40
All shorties and REO's are sold "as is". The buyer can add the "as is with right to inspect" addendum to an offer. Which means he can inspect after going under contract and if the inspection reveals repairs in excess of $250 (default amount if left blank) then he can move on and be reimbursed for any earnest money deposits.

I have had banks still make concessions after an inspection even though it was an as is. It can't hurt to ask while providing the detailed inspection report.
 

Bobby J

Beach Fanatic
Apr 18, 2005
4,043
600
Blue Mountain beach
www.lifeonshore.com
We actually prefer the "as Is" contract to the standard Far bar form when putting an offer on a foreclosure or short sale. Heck, I like to use the "as is" whenever working with a buyer. It really protects the buyer better then the standard form.
 

tidewater

Beach Comber
Apr 25, 2009
11
0
Another option

Great write up. I just went through this in Destin. Full price off with no contingencies. The bank got 4 offers in 3 days and we lost. I personally see the short sales as a violation MLS rules seeing as how their is no guarantee that the bank will accept that prce.... even if it is a cash offer with no contingencies.

If you think you really want an REO property and you belive other offers are close but don't know exactly - so might loose out - offer the bank to pay the amount equal to the highest bid plus $1,000. We used this with a aproperty and the bank took it.
 

destintide

Beach Comber
Feb 25, 2009
12
3
has anyone tried a reverse auction approach?

Particularly in the case of homogeneous properties...for example.....multiple vacant lots within the same subdivision which are held in OREO by different banks.
 
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