There is intense competition for homes in the Santa Maria and Lompoc markets, especially for homes priced under $300,000. There simply aren’t enough homes for interested buyers. It is not unusual when competing for a home to go up against 12 – 15 other buyers. And, some are pulling no punches when it comes to asking price. Recently, a buyer bid $50,000 over my client’s offer on a bank owned (REO) home. The bid was clearly outside of what the home was worth and it would not have appraised at that price. However, the buyer and their agent were counting on the home not appraising for the price they offered. They probably wanted to win the bid and then use the appraisal to get the seller to adjust the price.
This is a risky strategy on REOs as some banks have taken to countering buyers with a clause making them acknowledge that they will not adjust a purchase price downward because of an appraisal. Overbidding can also be a time waster on short sales because any adjustment to the purchase price has to be cleared with the bank which could start the entire clock over again waiting for the bank to approve the new appraised value. But, most importantly, it is risky because you don’t know what the appraised value will be. This particular buyer was taking a big risk because there were still new homes selling close to this home, and an appraiser could have justified a price about $30,000 over my client’s offer by using new home comps. But, then that buyer would have been paying the price of a new home for a foreclosed one, which doesn’t make much sense. The home still needed some work to bring it back to its full potential. Luckily, in that case, the listing broker suspected foul play and asked that buyer for proof of funds on their overblown offer, and they could not provide it — so my client ultimately got the bid.
There are other better methods to employ to have success in today’s bidding wars, rather than counting on an appraisal to save you from an unrealistic bid. The first is to work with an experienced agent. Please call me today for a list of the latest foreclosed properties in Santa Maria, Orcutt, Lompoc & Vandenberg Village. I can be reached by phone at (805) 878-9879, and by email at email@example.com. You can also search for properties on my website: www.BuyCentralCoastForeclosures.com.
Tni LeBlanc, JD, M.A., e-PRO
Broker/Owner, Mint Properties
(805) 878-9879, tni@MintProp.com