THE ADAMS TEAM
Rothwell Gornt Companies
Las Vegas Real Estate Agent Robert Adams Las Vegas Real Estate Blog
Beginning in 2007, foreclosures rocked the real estate world. Like an
out-of-control freight train, they began decimating the market, peaking in 2009.
Myths and rumors began propagating like mushrooms
as consumers struggled to understand the new reality. Although many
misconceptions have come and gone, we still encounter five myths on a regular
1. There is going to be a flood of new foreclosures to the market.
This rumor has appeared every year since 2008 and has been routinely debunked. However, recent announcements that the
Feds reached a settlement over the robo-signing scandal have reignited
speculation. The idea is simple: Since the cork is now out of the foreclosure
bottle, we’ll soon see another flood of REOs inundating
My personal opinion: don’t hold your breath.
Banks have learned that if they control inventory, they can affect local
prices. By releasing homes in measured amounts, they realize higher prices than
if they released a glut of homes. In addition, they’ve learned that if they can
mitigate their losses by agreeing to a short sale, everyone wins.
2. You can go directly to a bank to buy a foreclosure.
Every few weeks I’m asked how to buy foreclosures
direct from a bank. Someone knows a friend being foreclosed on and they want to
step in and grab the house before it hits the market. Don’t we all? In reality,
banks have a simple system – they first offer properties on the courthouse
steps. The rest they assign to asset mangers who then hire local real estate
agents to put them on the market along with all the other homes. Want an REO?
Pay cash at the courthouse steps or get in line witheveryone else when they hit
the local MLS (Multiple Listing Service).
3. You can get a killer deal by submitting lowball offers on
You would think this myth would be dead by now. Unfortunately, like Elvis
sightings, it just won’t go away. Here’s the truth: Banks want REOs sold in 30
days or less, so they typically appear on the market priced slightly under
comparable properties. If the property doesn’t sell quickly, the bank will lower
the price after about 30 days. Lowball offers are ignored and are, quite
frankly, a waste of everyone’s time and effort. You might get a deal by offering a lower price on
a foreclosure that’s been sitting on the market for more than 90 days, but
remember that there are good reasons it’s gone unsold for so long. And even if
you have cash, your lowball offer won’t be accepted —seriously.
4. You can’t use foreclosures when doing an appraisal.
Or short sales, for that matter. That is no longer true. In fact, in many
neighborhoods, that’s all that’s there. Therefore, foreclosed or distressed
sales represent the actual value of homes in the area and HAVE to be used to
appraise other properties. Don’t like it? Get over it. Times have changed and
the ways neighborhoods are valued have changed as well.
5. Foreclosures are only affecting the bottom end of the market.
This used to be true. However, while foreclosure rates on the lower end of
the market have actually decreased, they’re actually increasing on the upper end.
According to Daren Blomquist, vice president of RealtyTrac, the market share of
foreclosed homes under $1 million is shrinking, but those among properties
valued over $1 million are rising – up 115% since 2007. And foreclosures on
properties valued upwards of $2 million have increased by 273%. While some
well-known jet-setters have melted down and lost everything, others are choosing
to strategically default. They see it like
liquidating a poorly performing portfolio – they have enough resources to cut
their losses and move on. Historically, banks have been reticent to foreclose
high-end homes and absorb a large loss, but defaulters are now forcing their
hands and mansion foreclosure rates are moving on up.
Myths control behavior, and this has never been truer than in the housing
market. Savvy agents will work hard to educate their clients, debunk myths,
explain market trends, educate with solid facts – and actually close
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