Banks Price Low to Elicit Multiple Offers
Real-estate brokers say multiple offers on certain homes have recently become more common in parts of California and Arizona and the Washington, D.C., and Minneapolis-St. Paul metropolitan areas. . . Brokers say banks appear to be deliberately setting asking prices low in some cases to provoke bidding battles
–James Hagerty, “Bidding Wars Are Emerging on Foreclosures“; The Wall Street Journal (4/23/09)
I can personally vouch for the “deliberately setting asking prices low” part of the above quote: I’m working with a client who is now zero-for-three bidding on foreclosed homes in the last two weeks.
In each case, my client saw the property within hours of the property hitting the market (I’m watching like a hawk); submitted an offer for as much as 25% over asking price by the end of the day; waived all Seller disclosures, agreed to buy “As Is,” etc. . . . and still lost.
In at least one of these deals — all in Minneapolis — the Seller had failed to provide a mandated (non-waivable) Truth-in-Sale of Housing disclosure. That’s a big “no-no” that can be fined up to $1,000.
According to a Realtor representing one of the banks, the purpose is to create a feeding frenzy — and a rash of instant offers — that the bank can pick and choose from.
It may accomplish that, but it leaves lots of Buyers feeling chafed, and convinced that the system is “gamed.”
Hard to argue that they’re wrong . . .
P.S.: just underscores the wisdom of an astute Buyer like Warren Buffett, who never, ever gets into multiple offers on companies he wants to buy.