Earlier I blogged about Casey Serin and his foreclosure debacle. One of the intriguing things about Casey is the pricing of the properties he purchased and how he has priced the properties he is attempting to sell before they are foreclosed on.
Casey freely admits to purchasing many of the properties for over-market value to receive cash back at close. Now I'm not even going to get off track with the legal problems of these transactions. What I'm focused on is what effect the purchases had on the market.
As a REALTOR, I comp properties on a daily basis. One of the ways to arrive at a price for a listing or purchase is to study the selling price of comparable properties in the neighborhood. Buyer's such as Casey artificially inflated the value of a property by paying way over market for it. The selling price of a property is what is recorded and that is the price used by real estate agents and appraisers when determining comps. I've yet to see a price with an * disclosing the buyer received an obscene amount of cash back at close.
These artificial prices led to other homes in the area selling for a higher price because there were comps to support it. During the 2004-2005 frenzy, it was the norm for an agent to write an offer in the driveway of a house while staring down 2 or 3 others agents doing the same. The Buyer was ready to waive appraisal and come out of pocket with substantial cash to get their 'dream home'.
Where does this leave us today? Over at The Real Estate Economy blog, Paul Kaihla has offered up an example of a home for sale in Verrado. It is listed for $379,900. I haven't pulled comps and have no idea how realistically priced it is, but Paul is wondering how long it will be on the market and what type of incentives will be offered. I'm wondering the same. Now I'll do some digging on this particular property and follow its path but that isn't really my point. I like Verrado. I try to visit at least once a month to follow the progress. What concerns me about Verrado and many of the newer developments is the amount of non-owner occupied properties for sale competing with homes currently under construction.
New home builders are offering extreme incentives to buyer's. It is nothing to see a new build with a free pool, free landscaping, no payments for one-year, and an 8% commission to the buyers agent. Seller's of existing properties cannot compete with this. They certainly cannot compete if the home was purchased by an investor with a 100% interest-only loan. They are already upside-down. Offering incentives could possibly kill what was a short-sale in the first place.
What will happen in the coming months or even years is hard to tell.
Comments