It is a fair question.  There are benefits to a buyer when they buy a “regular” or what we now call an “equity” sale.  A non-distressed homeowner has often maintained the home better- both on the surface and “under the hood”, and there are more complete disclosures available to the buyer.  Bank owned and short sale transaction can be very frustrating for the buyer.  In these transaction the bank is the seller, and banks have little regard for what is fair or right for the buyer.  The average homeowner, however, is more likely to respond to a buyer’s concerns.

In fact, all things being equal, today’s buyer would absolutely prefer a regular sale.

And there’s the rub.  All things being equal.  The normal homeowner believes their home is worth MORE than a distressed sale.  So- let’s look at the numbers, shall we?

Since the beginning of this month 18 homes have entered escrow in Glendale.  Of those, 45% (8) were either bank owned (REO) or a short sale.  However, only 12% of the homes on the market are in some sort of distress.  Buyers are buying the distressed homes way more than the normal ones.

So… if you are a normal equity seller and you actually want to sell you can’t ignore the distressed listings.  You are competing with these homes and you must price accordingly.  Your home is worth more if  it is has more upgrades or is in better condition.

Here is the solemn truth.  Only 35% of the homes that come on the market will sell.  The rest will eventually give up.  Price is not the only thing that sells a home… but you can’t ignore the competition.

My favorite escrow company- Glenoaks Escrow, posted this article in their blog.

Bank Owned homes, also known as Foreclosures and REO are a significant minority of transactions in today’s market.  These transactions are different from normal sales and it is important to understand the pitfalls!

The following article outlines just one such pitfall- make sure your agent has a complete understanding before you enter into contract on an REO.

Buyer’s of a “bank owned” property, or REO sale as they are often referred to, may come across some verbiage in the Banks Addendum to the Real Estate Purchase Contract that catches their eye: Per Diem Penalty. Escrow Officers are often asked, what does this mean?

Latin for “per day”, per diem has many uses. What per diem is referring to in this instance is in the event escrow does not close by the date set forth in the contract, the Seller can impose a daily penalty to the Buyer for each day beyond the initial agreed upon closing date until the day the escrow officially closes.

The amount of this penalty differs depending on terms of the contract. It can be a percentage of the purchase price or a set daily amount (ie $100 per day). It is important to note, agreements can be made between the Buyer and Seller to waive the penalty when applicable.

One way a Buyer can strive to close escrow on time and avoid penalties is to complete escrow and mortgage paperwork and provide requested documents in a timely manner. However, circumstances may still arise that are beyond the Buyer’s control. In this event, a Buyer should ask their agent to renegotiate the terms of the contract to extend the closing date or to waive the penalty with the Seller and Seller’s agent.

In REO transactions, as with any real estate transaction, it is very important to be sensitive to all time frames in order to alleviate unnecessary charges.

If you have further questions about the Per Diem Penalty, do not hesitate to contact your escrow officer for further clarification or leave us a note in the comments.

You can read the original article HERE.

The good news for the Glendale homes market is that buyers want to buy homes in Glendale.  Interest rates are at historic lows and, while the inventory of available homes is growing, we have less than six months of inventory on the market.  More than six months of inventory would signal a strong buyers market.  The market might have hit bottom because the average and median prices for Glendale homes have remained reasonably steady over the last 6 months.

Now for the reality dose.  We all know that there is a large pool of homes that are either bank owned or on the way to being bank owned.  These properties are not on the market today, but these homes must be sold eventually- we call these homes the shadow inventory.  We have a huge shadow inventory in Glendale.

In a new post on foreclosuretruth.com, Sean O’Toole explains why he believes that foreclosures will continue to trickle into the market and not as a wave like many predict.

“The problem faced by both lenders and the government is that they can neither afford to kick homeowners out, or bail them out. For lenders, either scenario forces losses to be recognized, while thanks to mark-to-model accounting rules, and little or no pressure to foreclose from the FDIC, they can instead leave non-paying homeowner in place and push those losses into the future. Many believe that most major corporations manage earnings, what could be more perfect than getting to choose when, and if, they recognize mortgage related losses. For the U.S. government either scenario is political death. Politicians have no appetite for allowing banks to put families on the street en masse through foreclosure, nor forcing banks to deal with the problem through bankruptcy cram-downs or other means. At the same time they realize their constituents who do pay their mortgage (or rent) simply won’t stand for a taxpayer funded bailout of their upside down neighbor. Instead, it seems they believe bailouts should be saved for the truly deserving like the executives and corporate shareholders of banks, AIG, GM, etc.”

To read the entire article, click here.

The take away is for the Glendale homeowner who hopes to recover their “losses” in the next 6-18 months.  Folks, it simply isn’t going to happen.  We are not experiencing a temporary dip in value.  Make your decisions based on today’s value.