The market may be down, but sales of bank-owned properties are picking up, with multiple offers being made in many cases as lenders drop their prices to move foreclosed homes off the books.
REO homes (bank shorthand for "real estate owned") that are in good condition and listed at $300,000 or less are drawing as many as 15 to 20 bids from home buyers and investors looking for bargains, area real estate agents report.
Aimee and Cory Brown couldn't afford a down payment in 2003, so they partnered with Aimee's mother to buy a five-bedroom house in Murrieta that year. The family sold the house in 2005 and moved into a rental, intending to buy up, but found prices still too high for their budget.
"We ended up making an offer on a short sale in March, but since those take a while, we kept looking," Aimee Brown said. "Four days later, I found a four-bedroom, 2 1/2 -bath house for $225,000 online. It was a bank repo and had eight other offers, so we offered $250,000 and got it."
The house, a mile and a half from the Browns' rental home, was in good condition, with a Japanese plum tree in full bloom in the frontyard. When the couple's first son died, Brown said, she wanted to have a house one day where she could plant a Japanese plum tree in his memory.
"When I saw the tree at this house, I took it as a sign that it was meant to be ours," Brown said. "We looked at so many bank-owned properties that had been trashed. We didn't have the equity to redo a house completely, so this one was perfect. We'll have to buy more furniture because we're going from 1,300 square feet to 2,100 square feet."
Earl Bonawitz, general manager for Century 21 Wright in Temecula, said his company handles 120 to 150 bank-owned properties at any given time and has watched REO prices drop. Banks and investors who own the loans hire asset managers to oversee REO properties. The vast majority of asset managers, Bonawitz said, then hire real estate brokers to do the actual property listings.
"It costs a bank about $5,000 a month to hold a property," he said. "A $650,000 to $700,000 appraisal a year ago in some areas is now worth about $350,000. It took a while for the banks to adjust their mentality to that. Right now, anything under $300,000 is a hot price.
"It's a seller's market with REOs. Once a bank accepts an offer, they send out addendums that are nonnegotiable. If you don't want to sign them, fine, they've got other buyers. The addendums say you'll close by 'X' date, and if you don't close by then and it's your fault you'll pay a $100 to $150 penalty per day. They choose the service providers for escrow and title."
