The Santa Maria and Lompoc real estate markets are currently dominated by foreclosure listings. Of the 663 active listings for homes/condos in the Santa Maria – Orcutt area, approximately 25% (165) are bank owned properties (REOs), and about 50% (339) were short sales. Similarly in the Lompoc – Vandenberg Village active market for homes and condos, there are 198 total listings, and 20% (39) were REOs and 40% (81) were short sales. This means that 75% of the active market in Santa Maria and 60% of the active market in Lompoc and its surrounding areas could be classified as either a foreclosure or a pre-foreclosure. Certain trends or practices are becoming fairly routine in this market (and in many cases contributing to buyer fatigue):
1) Properties listed as “active” that are not actually available. The local boards have taken the position that unless a written contract signed by both the parties is in the broker’s hands, the property should still be listed as active. Because of the bureaucracy of dealing with a bank, it can take weeks to receive signed documents back. During that time the property is still being marketed as active, but in fact they have a verbal acceptance on the property. I disagree with the decision to leave these properties active; but that does not change the practice. This is very frustrating for buyers as they research active properties that are not truly available.
2) Underpriced listings. Yes, properties are actually being listed too low by some banks to attract an intense amount of interest. Two recent examples come to mind, in both instances the bank priced a property almost $100,000 below its current market value and as a result received over 25 offers. This is becoming fairly common tactic, although to a lesser degree than the example given, and many times results in REOs being bid up slightly past the reasonable market value. It is a smart tactic for banks, but it creates a frenzied atmosphere for buyers.
3) The “Highest & Best” counter offer. Instead of countering to buyers individually, (which many times would be impractical with so many offers), banks will simply issue a request for a buyer’s “highest & best” offer. This puts the buyer in the position of bidding in the dark against their own first bid. For all they know, they are the highest bidder, and are simply increasing their bid even more. This has also contributed to a stressful environment for buyers. Sometimes, the “winners” of these highest & best contests walk away from their winning bid simply because they don’t feel like a winner after they’ve won!
4) Sitting on an offer until multiple offers are received. When the techniques above don’t work, sometimes banks will try to create a competitive situation by sitting on an offer until they receive multiple offers, and then issue a “highest & best” call. I’ve witnessed situations where there was one buyer and that buyer could not receive a response to their offer for 2 weeks until another offer came in, and the bank then requested both buyers to sign multiple counter offer paperwork. The buyer was understandably furious. Some banks are upfront about the practice and disclose in their listing information that they will not look at any offers the first week their listing is active.
Overall, these effective tactics work for bank sellers but burn out buyers very quickly. Many buyers simply drop out of the foreclosure market. It is a difficult market to buy, but not an impossible one. I have tips and strategies to help you navigate the current market for foreclosures in the Santa Maria and Lompoc areas. Please feel free to give me a call at 805-878-9879; I would be happy to answer any questions you may have about the local real estate market.
Tni LeBlanc, JD, M.A. , e-PRO
Broker/Owner, Mint Properties
(805) 878-9879, tni@MintProp.com
*Based on the information from the Central Coast Regional MLS & Lompoc Valley MLS. Neither the Association, the Multiple Listing Service, or Mint Properties guarantees or is in any way responsible for its accuracy. Data maintained by the Association or its MLS may not reflect all real estate activity in the market