MYTH! (sort of)
If, by “smokin’ deal” you mean as compared to the prices of 2,3,4 or 5 years ago, then ABSOLUTELY!
But if you mean, you’re going to offer 20, 30, 40, or 50% below current asking price, well then you have three chances! 1) None 2) Fat 3) Slim left town.
There’s no lack of sound byte reporting that is telling you how much less foreclosures sell for than regular or standard sales. The truth is: traditional media is disconnected from the realities of local housing markets.
All first time home buyers would love to get a “smokin deal” on their first home but the realities of today’s market are driven by “supply and demand” not by your desire to get a “deal”.
If your first home will be in a market that is dominated by distressed sales, then the supply is controlled by the banks and major lenders. Their sole purpose is to sell the house for as much
as the market will bear. That’s why the department you’ll be dealing with is called “Loss Mitigation” or in layman’s terms: “Cut our losses department”.
The banks spend a lot of money determining the market value for each one of the homes they own (REOs) or might own (short sales). They might hire an appraiser to determine market value
and/or a local real estate broker to do a BPO (Broker Price Opinion). Using this information is how they arrive at what will be an acceptable selling price.
The banks also have to answer to the investor(s) who own/owned the loan that is/was on your “dream home”. If the banks have already repaid the investors, once again they have to mitigate their losses, because their investors demand it and very often will not approve anything less than their perception of value.
You might have heard that up to 70% of all home sales are to first time home buyers. That creates demand, so you will be in competition with other first time home buyers and thus “the bidding begins”
Almost every market has a “tipping point”. Homes above that price point generally have less competition and below it there’s more competition. So, your approved target price will tell you how much competition you’re likely to be facing and whether your offer will be accepted
If you’ve hired a Realtor who specializes in helping first time home buyers, they will know that “price point” for your market and can advise you on the amount of competition you might be facing and help you write a competitive offer.
Even if every offer you write is competitive, in most markets you’ll probably be writing more than one before you’re the winning bidder. Writing a “lowball” offer does absolutely nothing to move you along the path to home ownership.
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