Is the price of an IRVINE bank owned home negotiable?

by Robert Mack on August 7, 2009

in Irvine Real Estate

Even though we are currently experiencing a great buyers market in Irvine, that doesn’t mean that sellers are just giving homes away.  Bank owned homes are far and few between in Irvine.  Currently there are a total of 8 bank owned foreclosed homes available for sale in Irvine out of a total of nearly 600 homes.  That’s just over 1%. 

Most home buyers are looking for a great deal, and it is “ASSUMED” that a bank owned home is where the best deals are found.  A prospective buyer is competing against thousands of buyers in Irvine, for just these 8 homes.  

Banks are not in the business of holding property, and the longer they hold these homes, the worse it looks on their books to their investors, therefore, these banks normally price bank owned homes around 5-10% below market to get them sold in the shortest amount time, to the highest most qualified buyer.  The combination of the low inventory of bank owned homes in Irvine, coupled with the number of aggressive buyers and the aggressive pricing strategy that they use, causes a huge “FRENZY”, or what I call, the “FORECLOSURE FRENZY”. 

Motivated buyers normally offer a price above the list price, since they know that the home is priced below market.  In addition, they know that there is some stiff competition out there and the purchase price they choose must beat out others.  On top of all this, if you (the buyer) are planning on obtaining financing, now you are competing with investors who plan on purchasing the home with all cash (which the banks love to see).  It is not uncommon for most banks to accept offers that are all cash, even if they are lower than other offers that are contingent upon obtaining a loan. 

So you ask yourself…..What must you do to be one of the savvy buyers that is able to buy a bank owned home and beat out the competition.  Well, it isn’t that complicated as long as what is involved is within your means.  The most prepared buyers are the ones that are able to pick up these Irvine bank owned homes.  When I say prepared I mean that you have to be ready to look at these homes the minute they pop up (the first day on the market preferably).  Have your financing and pre-approval in order and on file with your agent.  If you are planning to buy all cash, have your bank statements ready to submit with the offer.  The stronger you look as a buyer, the better your chances are.  Most importantly, know your competition and know the market value of the home and submit an offer that will have a strong chance against others…..EVEN IF IT IS ABOVE MARKET VALUE.  

If you want the home, and it is priced to sell, then step up to the plate and make a strong offer! 

To learn more about buying Irvine foreclosures or to get more information, contact the Mack Team at (949) 209-7309, or use the contact tab above and submit your questions. 

Comments are welcomed and appreciated!

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Post by Robert Mack

Robert has written 724 articles.

{ 2 comments… read them below or add one }

Asia August 10, 2009 at 4:51 am

This is all well and good. What you state in your blog I don’t dispute, however there is one thing that plays havoc with my wits, and that is if the property prices and interest rates are at their lowest, what is it that prevents the public at large purchasing homes in this buyers’ market? You can’t wait any longer than this to buy your home—that is if one is in a position to buy, yet one postpones. That I don’t understand. For instance, I have a colleague at work who is really interested in purchasing a property in Irvine, yet she hesitates. I ask her why. Her answer is: “I’m waiting to see if the prices fall even further.” Or “I don’t have enough cash for a down payment.” Which I know that is not true. Husband and wife are making just under $200,000 a year. They have rental properties that either bring positive cash flow or just even. What is it that makes this person hesitate? That I don’t understand. Robert, perhaps you can shed some light on this.

robertmack August 12, 2009 at 11:11 pm

Hi Asia,

Thank you for the comment! The mindset of “I’m waiting to see if the prices fall even further”, is so common right now in the Irvine market place, especially with small investors. The number of pending and closed homes in Irvine is up right now and most of the activity that we are experiencing is coming from 2 major sources.

1. First time home buyer – This type of sale is so popular right now because these are buyers who had no hope of affording a home just over 2 years ago and now home ownership is a possibility. They are grateful for the opportunity to finally be able to afford a home rather than renting. In addition to the affordable home prices, there are great first time home buyer tax benefits that they can take advantage of. The combination of the two has really created a “no-lose” situation for them.
2. Large/Experienced Investors– This type of sale is also very common right now. It is obvious that large investors are completely emotionally detached from the investment opportunity and all they see is dollar signs in a market like this. Picking up whatever they can, knowing that regardless of whether they purchase the home for 5 or 10% more, in the long run, they will have made a solid investment.

It sounds like your co-worker is a smaller investor, with a handful of investment properties under her belt. In this situation, the bottom line really makes a difference, since the amount of funds that they are working with may be limited. They obviously want to get the “best bang for their buck”. With the amount of uncertainty out there in our market place, the newspapers and media spreading “gloom and doom”, and the fact that her family is probably whispering their 2 cents in her ear, can create a situation for her where she may be second guessing her instincts. Everybody likes to buy, and in the process they also want reassurance from others that they are making the right decision!

Will the market fall even further? Will financing be harder to obtain? Will interest rates sky rocket? These are questions that echo through the business world all day, and no one really knows the answer. Real estate is intended to be a long term investment; therefore, whether you buy when the market is declining, or when the market has hit the bottom, in the long run, it really makes no difference.

The unfortunate reality is that most of the buyers who wait for the bottom to hit, end up buying once the market begins to appreciate because they just waited too long!

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