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REO agents using low prices like chum to attract buyers

June 17, 2011

Recently I’ve noticed a trend with bank-owned listings. It seems the listing agents are pricing their foreclosures way lower than the bank would ever accept in order to cause a feeding frenzy to ensue.

I liken it to chumming to attract sharks or larger fish. Once the sharks or home buyers and investors have arrived on the scene the biggest shark or buyer with the highest bid wins.

The point being the price is nonsense and is only used as a tool to attract or cause a frenzy of activity. Ultimately, the majority of buyers lose when bidding on REO’s. Only the savvy buyer who understands the game has a chance.

I’m going to crunch some numbers and see if this theory holds true. I’m going to check out recent sales in one geographic area and compare the list price vs. sale price for both traditional sales and bank-owned properties. If my theory is right there will be a significant difference between the two types of listings.

Having this information available could help foreclosure buyers understand what sort of offer is necessary to have a fighting chance at winning in a bidding war. Give me some time and I’ll have the data up.

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5 Responses to “REO agents using low prices like chum to attract buyers”

  1. Immigration Business Plans on June 22nd, 2011 5:22 am

    They should have a limit to how low a bank owned property can be listed for, because it is really just false advertising if the list price is way lower than the actual price the bank will be willing to accept. I get the part about the feeding frenzy, but you are just wasting a lot of people’s time, and as you point out Chris, only the savvy investors that understand the game will have a fighting chance of getting their offer accepted.

  2. Mark Brian on June 27th, 2011 6:29 pm

    It seems that price is even more important than ever in my market. It does not matter how nice the home is or how great the location is, unless it is a great deal, the buyers just will not consider it. And it has to be in move in condition unless the seller is willing to practically give the home away.

  3. vacation clubs on July 2nd, 2011 1:09 am

    This is really a sad reality and a big danger for homebuyers. But I think it also depends greatly on how a person will see offer right before engaging his or himself with bidding processes. When we talk about these things, it’s always better to ask help from professionals specializing on this kind of field to ensure safety transactions.

  4. chat with likeminded on July 13th, 2011 8:51 am

    I guess you are right, it is that bargaining mentality that manifested in people’s minds. They know in times of recession and crisis houses sell cheap, that’s why they try to get the cheapest they can, and price then seems to be more important than anything else. But this can also turn into a kind of bargaining frenzy, when people are nothing but greedy anymore.

  5. Travis Vayssie on July 13th, 2011 4:38 pm

    I have seen quite a few REO realtors do this in the Orange County area, so they can get people out of the Jumbo Mortgage Loan market. Good for them, but no so much for everyone else.

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