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Auction Brings Heckling from Neighbors

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Terrel L. Shields

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Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
A local builder died just as the market was doing its swan dive. His son and wife were trying to TCB but Jr. ...thinking he was smart....instead of dumping assets refused to sell even at break even prices.. Until he got desperate and then it was too late. So they took the keys to 2 institutions and gave 'em back.

One bank auctioned off 3 lots and 2 houses. The homes in the area were in the $280,000 range and the last lots sold were around $32,000.

The neighborhood came out in force anxious to see the house sell for what they were "worth"....when the auctioneer opened bids at $200K, the boos range out... but the hecklers got very quiet when no one bid.. they dropped the price... Finally sold at $181,000. The next one...$107,000...They got to the lots and set in at $10,000 - no takers...finally sold all 3....$5000 each.

By this time you could hear a pin drop as the neighbors went back to their houses.

I ran into a banker a couple days ago. They had a sale last week end. They had attempted to sell this property for $175,000 by advertisment. No go. They auctioned it and didn't get a bid. Finally, after nearly 2 years they did an absolute auction and it brought a fraction of the $175,000..a small fraction.

And that's the market in NW Arkansas this week.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
One big problem is that even qualified buyers are being turned down by mortgage lenders. We're seeing that down here. Approved financing is becoming very scarce. When you cannot get money to the end user, it doesn't matter what you're offering something for. No money, no sales.
 

AJL118

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Joined
Jul 29, 2005
Professional Status
General Public
State
Florida
One big problem is that even qualified buyers are being turned down by mortgage lenders. We're seeing that down here. Approved financing is becoming very scarce. When you cannot get money to the end user, it doesn't matter what you're offering something for. No money, no sales.

The banks have no home for their mortgage paper and are scared to death to put it on their own books because of their liquidity problems. If they put it on their books, it adversely impacts their accounting ratios. And the party goes on.............
 

Walter Kirk

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Joined
Jun 24, 2003
Professional Status
Licensed Appraiser
State
New Jersey
Perhaps the banks could have realized more in the sale of the properties if they offered financing. I have never understood why mortgage lenders dump REO's instead of turning them into an income stream.
 

Terrel L. Shields

Thread Starter
Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I have never understood why mortgage lenders dump REO's instead of turning them into an income stream.
bank rules for one. They are not in the rental business and don't intend to compete against their own customers. Further, if we look at the definition of "Market Value"....then the buyers cannot rely upon bank financing, then the buyers are cash...real money buyers. If they buy homes for a discount that is a reflection that ANY KIND of financing is a "concession" of sorts....and Cash is the truest measure of cash equivalent value....
Not "dumping" an REO, means they are going to have to spend management fees, mowing, utilities, insurance, taxes, etc. We have some new homes on the market currently with past due property taxes that are in excess of $5000...That is going to be $7500 come Jan.1 ..making the banks position erode even more and with REO's hanging over the market...it continues to keep prices low. Sell and the buyers will be able to flip to higher values quicker and the velocity of money increases.. Velocity is a trickle now.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Went to a similar auction, on two houses, in my neighborhood about a year ago. 80% of the turnout was the neighbors. I was there on research for my job :)

The auctioneer had a 10% surcharge to the final price. $340,000 became $374,000 on the bigger of the two, which had sold new for about $525,000 a year before. Neighbors didn't want to believe it. The owners chose not to sell. Now the houses sit vacant and are probably on the verge of foreclosure.

My neighborhood, being a new construction project finished right near the end of the boom, is a sad, sad place right now.
 
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