FIVE WAYS TO MAKE REO OFFERS IRRESISTABLE TO BANKS

STEPHANI DAVIS HAS PENNED a splendid article offering buyers and investors a few tips in getting the banks to stand up and take notice on an REO offer. An REO (Real Estate Owned) is a property that reverts to the mortgage company after an unsuccessful foreclosure auction. To a buyer an REO property frequently offers a great deal, but can often be a nightmare for unsuspecting investors, so buyer beware...

But let's think positive in this article. Quickly, the five hot tips for winning the favors of banks willing to take a loss on property they own but wish to get off its books, are:

Make cash offers

Dismiss the inspection contingency

Give the listing agent both sides of the commission

Offer a large earnest money deposit

Offer a quick closing

Now, of course, it would be that rare deal that ALL of these suggestions will work for every buyer. In the everyday world the perfect REO buyer would be the one COULD and WOULD offer each of these hands down assurances to the bank. But in a down market like we are in today where investors are snapping up properties, there is indeed trusted wisdom in Stephani's advice.

But while we are on the topic, what role do professional appraisers have in this scenario, especially when the client is not you the buyer, or Jane the seller, but First Trust the lender? Here is a supplemental article on the appraisal business that savvy readers should refer.

If you've got cash on hand and want an REO, don't hesitate. There are some spectacular deals out there. I've given you Stephani's five tips, but you need to read her full essay to know exactly what she's learned.

NORTHERN VIRGINIA MARKET IMPROVING

THE HOUSING MARKET IN THE AREA is beginning to stabilize. Just today, my wife and I spotted an UNDER CONTRACT sign posted on a $900,000 palatial homestead on Lovettsville Road. Metropolitan Regional Information Services has released its July statistical report. There is some very good news. Both single family and townhouse inventory is moving at a clip, dropping a whopping fifty percent or better from a year ago across the area. Median prices are holding firm from July a year ago, although 2009 year to date median sales price numbers still average 11-20% lower than 2008 prices year to date indices.

Click below for each report (pdf):

LOUDOUN COUNTY

FAIRFAX COUNTY

FREDERICK COUNTY

ARLINGTON COUNTY

FAUQUIER COUNTY

But before we draw too many false conclusions on the wall, let's give some attention to one common misconception in the real estate statistics game. Dictionary.com defines ‘Median’ as “the middle number in a given sequence of numbers”.

Studying the linked statistics above must be done with that definition applied. Keep in mind that the median price is not the average, nor is it the mean price, which is expressed as half the house prices in any given category rise above and half the house prices in that category fall below the mean price. The median price just means that if there are 7 sales—the price of the number 4 sale is the median home price.

One cannot draw the conclusion that all prices have fallen x% when comparing July ‘08 and ‘09 median home price figures. Remember many of the sales are foreclosures. Much of the movement in our market is in the lower price points and in the most distressed price points—hence a lower median price.

Median home price is still a valuable indicator in the market but one must be careful of the conclusion one draws from the information. There is no denying prices have fallen precipitously. But, it’s important to evaluate the numbers in the right context.