Howard Nemetsky

This is my first attempt at this Blog so here goes.

I've been dealing in foreclosed real estate for almost five years and I'm always amazed at consumers perception that the bank "has to sell" the property so they think they can offer a fraction of the list price and the bank will be glad to take their offer. What most don't understand is the pricing process took a lot of work. First they ask a local realtor to do a BPO (Brokers Price Opinion). In addition an appraiser is called in and he does his trick. Then its taken to the investor holding the paper and he gives his input as well. What most don't understand is the whole thing is graded by the management company. If the price comes in more than 3% either above or below the list price the agent gets a failing grade. This grade is used to determine if the agent gets anymore listings. Too many failing grade and he get shut out of the system.

Another misconception is that what is owed on the property comes into the picture. Once the foreclosure happens the loan is dead - nothing is owed. That remaining balance is never calculated into the picture. The bank now has an asset and it will sell that asset relative to its value. If the property is valued at 100k, the bank is going to try to maximize the return and get close to that price. In the first 45 days of the listing the bank is trying to gauge the value and are usually reluctant to come off the price. It kind of works like a reverse auction. The price will gradually ratchet down until it finds a buyer.

Today we're seeing the banks shortening the timelines somewhat and considering offers that they would not consider six months ago. This is a function of the market more that anything. Remember, these guys are SALARIED employees. They don't make any more or less if a property is on the books. True, their job is to get these sold but the investor is seeking their service to get the best return on a deal that has already caused problems.

Foreclosure can be a nightmare or a great deal. Take the emotion and misconceptions out of the transaction and everyone will be better off.