Why bank owned properties have a higher list to sales price ratio

Even though it is counterintuitive, it's a fact; the average list price to sales price ratio is higher for bank owned properties. A few reasons for this will be addressed here. Keep in mind that the only person who sets the sales price is the person paying for the property. A seller can price their property at any price they want but it will not sell until a buyer sees the value. The closer a property is priced to the buyer's buying threshold the higher the list price to sales price will be. The bank's asset managers are usually better at pricing property than private owners. Unlike the typical property owner, the asset manager has no emotion attached to their decision making process. Their main goal is to cut the bank's losses. Before they make a decision about a marketing price the asset managers will receive more than one opinion of value on the property. Often times this includes a professional appraisal. They also ask for information about the property's market segment; are prices going up or are they going down? This helps them logically determine what price will generate buyers. Often times the private owner sees value in features of their property that buyers will not accept. For example, an Outer Banks seller recently thought that dark paneling walls actually added value because they are easy to clean. In reality, dark paneled walls reduce the value in the eyes of most buyers today. The bank's asset manager also requires regular updates on their property activity and their property's market segment. If a property is not receiving showings and/or offers then they'll lower the price to entice buyers. On the other hand, if the house is receiving tons of activity they will be less likely to negotiate on the price. Oftentimes these asset managers are more aware of market conditions than private sellers. Private homeowners are generally not as aggessive with their pricing because can use the property while it is on the market. If you are seriously looking at properties today, don't expect to purchase a bank owned property for much lower than their asking price. Over the last few months, sales prices were close to 94% of asking price on bank owned homes. Private sales were selling for less than 92% of asking price. Have your Scott Team Realty agent provide you with a market analysis on the property you would like to purchase prior to making an offer. This will give you a target price prior to beginning negotiations. For more good info on Outer Banks real estate click here: http://www.scottrealtyobx.com

What should I know about Outer Banks Short Sales?

Short sales have become a larger part of the Outer Banks' real estate market. A short sale occurs when a seller has to sell and they owe more on their property than it is worth. Short sales differ from a normal sale because the seller's lender gets involved. Here are some of the differences: First, they usually take months to get a response from the seller's lender. It can take the seller's lender anywhere from a month to six months to respond to your offer. This happens because the lender wants to make sure the seller has no way to make up the difference owed and because they want to sell the property for as much as possible under current market conditions. Second, a common practice today is for the seller to under price their property to generate a quick offer. They do this because most lenders will not talk with a seller about allowing a short sale until they have a contract on the house. Often these sellers are just a few months away from foreclosure and they are anxious to be done with the property. Third, it often takes a seller a while to provide the lender with all the information they need to make a decision on selling short. Once the lender has all the seller's financial information they get an opinion of value from a real estate agent or appraiser who has no interest in the transaction. As mentioned above, the goal of the lender is to get as much money as possible for the property. They look at what the property is worth, what it would cost to foreclose on the property and then make a decision on the best course of action. Fourth, OBX buyers today often see a short sale property with a status of "under contract continue to show". This status means that a buyer and the seller have agreed on the price and are now waiting for the seller's lender to make a decision. As long as the first buyer continues to move forward with the purchase of the property, the seller and his lender can not sell the property to you. Buyers today often get impatient waiting for the seller's lender to make a decision and void the contract so submitting a back-up offer might be a good option for the right property. There are many other differences in a short sale and a normal sale. Using a Realtor who is familiar with short sales and who is in the market every day will improve your chances of a successful short sale transaction.

Where can I find good general information about Outer Banks real estate?

Buying and selling property on the Outer Banks is different than most areas because of the nature of the resort real estate market as well as issues that arise with purchasing coastal property. If you are serious about purchasing here then you'll need to find a good resource for learning about this different market. Realtors who have made a signficant investment to attract buyers through print media and the Internet are a good place to start. Most of these Realtors have good information on their web sites. Good information can also be found at the Dare and Currituck County web sites. Here information is available on tax assessments, property sizes and other things going on within each county. Contact a local Realtor. They should be able to send you the addresses of many helpful local web sites.

Why should I use just one local Realtor?

Using just one Realtor will save you time for enjoying the Outer Banks and will likely make a difference in the service you receive. Oftentimes Outer Banks buyers will call a Realtor about a property they have listed and then call another when they see another property they find interesting. When you call different listing agents about their listings, more often than not you will be asked many of the same questions by every Realtor you call. Also, most Realtors who have made a career of selling Outer Banks real estate now have CallerID. When you contact them about a property it is likely you will receive additional follow up calls. Even if you don't take these calls they take up your time. Contacting just listing agents eliminates your ability to receive representation because they automatically represent the seller. Every property on the Outer Banks has good features and bad features. Of course listing agents have to tell you about all the defects with the property but they would be doing their seller a disservice if they told a buyer how some of the features are less desirable. A smart buyer will want someone who is very familiar with the area to point out all the pros and cons of each property so they can make an educated buying decision. A listing agent can not do this. Agents who have made a career of selling real estate want your future business and referrals. Therefore they will do all they can to make your buying experience a happy one. Chose one Realtor with whom you can build a lasting relationship and allow them to serve you in your property buying experience.

More Frequently Asked Questions

How easy is it to get insurance on a beach cottage?
North Carolina receives almost as many landfalls from hurricanes as Florida but insurance is still available for Outer Banks homes. Most homeowners carry three types of insurance. The typical homeowner’s policy that covers fire, liability and theft is easily obtainable from many local agents. Wind and hail policies usually come from an insurance pool available to coastal North Carolina property owners called the “beach plan”. Flood policies that cover damage from rising waters are required by lenders for homes located below the 100 year flood plain. Fortunately flood insurance is subsidized in most areas by FEMA and is reasonably priced. Insurance costs here compared to many less threatened inland areas are close to double. Fortunately, the Outer Banks has lower property taxes because second home owners do not require as many governmental services as a year round resident.


Why is spring a good time of year to buy a vacation home?
Most rental companies begin disbursing rental funds in the winter making cottages easier to carry than first thought. When closing on a property this time of year you will likely get back rental proceeds for the summer rentals. Also, this is the time of year that is great for using it yourself. Waiting until the fall gives a new owner time to fix up their property before the next rental season but you have to carry the property through part of the winter before getting any rental income. This spring has an extra advantage of buying. As of this writing, interest rates are hovering around 5% making beach property much more affordable. Consider a purchase this spring while interest rates are still great!

Is it hard to get a loan for a beach property?
Years ago during the boom it was too easy to get a loan for a beach cottage. Lenders now have stricter guidelines for lending money. However, if you have good credit, a decent down payment and your debt to income ratio is low you should have no problem qualifying for a loan. The best thing to do is contact a local lender who can pre-approve you. In just a few minutes they should be able to tell you if you need to improve in one of these areas and/or give you an idea of a good price range of properties to consider.

OBX Home Buying FAQs

Here are a few questions commonly heard by OBX Realtors. Homes and Land Magazine has asked me to do a series on frequently asked questions. These questions will also appear in this magazine.

Where should I start my search for a second home?
When beginning your search, you should make a list of the most important features a property must have and must not have. This information along with what you want to spend will save a tremendous amount of time looking at unsuitable properties. Sharing this information with your Realtor will save you time as well.

Will the rentals pay for my vacation rental home?
Rarely do Outer Banks vacation rental properties pay for themselves during the first few years with a 20% down payment. Buyers today should expect the rental income to make carrying the property much easier while they enjoy it. Vacation rental income will increase past the break even point over the years for properly maintained and marketed houses. Today’s low prices and interest rates have made owning a beach property more affordable than they have been in years.

How do I get a complete list of OBX foreclosure homes for sale?
Almost all foreclosure homes are listed for sale through the local Realtors’ Multiple Listing Service, (MLS) for maximum exposure. Because some lenders do not want their properties identified as bank owned, the best way to find all of these properties is to have your agent search by the name of the owner. Most agents can provide you with a list in just a matter of minutes.

How can I know I am getting a good value?
Most Realtors will prepare a market analysis for their clients on the property they are considering before they write an offer. This allows the buyer to set a target price for negotiations. The market analysis is based on recent sales of similar homes and homes currently for sale. If you know what other buyers were willing to pay for a similar property and have viewed others that might also meet your needs then you can easily determine if a property is a good value. Having this information will give you confidence that you will be paying no more than the property is worth.

The Outer Banks…an investment in a lifestyle.

Spending just a week or two a year on the Outer Banks was just not enough for thousands of Outer Banks vacation home owners. They realized the value of the lifestyle and wanted additional time to create memories here with family and friends.
Having a home on the Outer Banks also allows owners to come and go as they like during most of the year. Vacation homeowners will frequently take long weekends during the off-season to enjoy the beach and piddle around their house. The pride of homeownership also comes with a beach cottage. Vacation homeowners are able to decorate and modify the home to their specific likings. Arriving at the cottage and seeing the trophy marlin or the picture of the entire family on the beach from the year before is a great feeling. Besides a place of refuge from life’s daily grind Outer Banks homeowners have discovered that owning a home here is easier than it appears.

Today vacation homes are more affordable than they have been in recent years due to reduced prices, increases in rental income and low interest rates. Despite the recent economic slump vacation rental income still remains fairly high and all signs point towards a much stronger year this year for vacation rental income. It is unlikely that a vacation rental home will pay for itself right away but right now current market forces combined together make vacation rental home affordability the best it has been in a long time.

Making memories with friends and family is really what owning a home at the beach is about. A recent popular song talks about how life passes in just the blink of an eye. The lyrics talk about a man who recently turned 102. In an interview he tells the reporter he can’t believe how fast he got married, raised children and lost his wife to old age. Waiting for things to change to enjoy the beach lifestyle may not be a good idea. Make an investment in a better way of life as soon as you can by purchasing a beach home.

Days On The Market

A frequent question Realtors receive from buyers is, “How many days has the property been on the market?” Knowing this information may give some insight into the motivation of the seller. In some areas it is common for the house that is on the market a long time to have an anxious seller. That is sometimes the case in this resort market as well.

In the past the number of days on the market has not always been 100% accurate. If a property was withdrawn from the market for just 31 days then it could be re-listed by the same broker and the days on the market count would reset to zero. Also, it was common for just a slight change in the listing information to cause the days on the market to reset.

As of February of 2010, the local MLS has a new field called Cumulative Days on the Market. There is a program within this field that searches numerous property identifying fields in the MLS to make sure the property was not listed in the last 90 days by any local Realtor. If it was listed then the Cumulative Days on the Market will not reset. Of course the accuracy still depends upon the data inputted by the listing agency but this new feature should increase the accuracy of the days on the market information available to both Realtors and buyers.

A buyer should also look at the property history of a listing. Since about 2003 the local MLS has kept the sales history data. It will include price reductions, how many times the house has been listed and when other information has been added to the listing. The property history can give you much more insight into what the seller is thinking. For example if the property has been listed a year with no price reductions then, it is likely they are less negotiable than the seller who has had four price reductions in the last few months.

Good information is the key to good decision making. It pays big dividends to find a Realtor who can provide you with the Cumulative Days on the Market information as well as many other types of information necessary to make a wise buying decision.

Will this be the year?

One of the cover stories in the December issue of Money Magazine is “Real Estate: Why it’s the year to buy”. This article caught the attention of many people because it’s been a while since the press has favored purchasing real estate. This article looks at that story from an Outer Banks perspective.

It states inventories are shrinking. Factoring in the seasonality of this market, the number of properties for sale in the Outer Banks MLS has decreased every year since 2006. Choices here are less than they used to be but there are still plenty of great values to choose from.

The article states even if properties depreciate in 2010 that the majority of the depreciation has already occurred. Sales of real estate in the last quarter of 2009 suggest that prices are getting down to the point where buyers feel comfortable purchasing. Vacation rental homes have dropped in value to where the numbers now make sense for many buyers. As a result we saw more sales this past fall than in any fall since 2005.

The article mentions interest rates should not get any better and may go up when the Federal Reserve stops buying mortgage backed securities this spring. Rates on the Outer Banks continue to stay around 5%. Just a 1% increase in this interest rate will increase the monthly payment by more than 10%.

It states demand is highest for entry level properties. This is certainly the case on the Outer Banks. Many locals have taken advantage of the first time home buyer tax credit and out of town folks are favoring the lower end properties so they don’t have to count on the rental income to afford it.

Keeping watch for additional signs of the market improving was also mentioned in this article. The author does not want her readers to miss out. Key indicators to watch include an uptick in interest rates and the local absorption rate in the area where you would like to purchase. Your local Realtor will be happy to keep you updated with this information.