A few years ago Realtors® were up in arms about the thought that banks might get into the real estate business.  Letters were fired off, hearings were held and the NAR spent thousands to make sure that banks stayed at arms length from the real estate transaction.

Fast forward to today and across the country, banks and lenders ARE in the real estate business.   In fact in some areas of the country there are more bank owned properties listed in the MLS than there are seller owned properties. 

What makes this so frightening is that the banks and lenders have no clue how a real estate transaction works.  It isn't that they aren't trying but the employees behind the scenes have never handled the listing or sale of a home in their lives.  So when a contract comes across their desk they have no idea what they might be seeing.

Over the last two weeks I have been involved in a transaction that has completely baffled not only me, my clients and my broker but I am sure the other agent who also has an offer in on the same property.  As listing agents one look at the contracts and we would have been able to give our seller a simple recommendation.  Offer A is for x dollars and Offer B is for y dollars.  Offer A is higher and all other terms and conditions are the same so let's select offer A.

However the bank decides to ask both Offer A and Offer B to make a best and final offer.  What happens?  Both Offer A and Offer B come back with identical amounts and terms.  Alright wise ones now what do you do?  You send both offers a counter outlining the price and subsidy that you will accept.  Excuse me you send both offers the same counter offer instead of letting them choose what they want to counter?

What did the bank think would happen?  Perhaps that someone would blink and pull out of the process?  Instead they get back the exact same accepted response to their counter offer.  So you still have the same offer from two prospective buyers.  Would an experienced agent ever have gotten a seller into this predicament?  I highly doubt it.  While the bank is trying to sort all of this out both agents submit contract amendments changing the amount of their last offers.

 Now Offer A and Offer B are back to being different again.  Does the bank decide that enough is enough and it is time to select the current highest offer in their hands?  No they ask once again for best and final offers.  At what point does this go beyond stupid to the point of ridiculous?  Meanwhile they have a home that could be two weeks closer to settlement

If  banks want to be in the real estate business then they need to hire brokers and real estate agents in house to unlock the mystery of how a real estate transaction works.  I'm not going to tell them they can't be in the real estate business because folks that ship has sailed.  Instead now we have to figure out a way to get inside their doors and help them understand the process and that when you have multiple offers you don't under any circumstances counter with the exact same terms to TWO different contracts! 

....to the fridge that is.  No matter how many times I give out the warning to buyers as we walk in the door of a foreclosure property it happens.  It is a habit that just can't be broken. 

Obviously knowing what condition that appliances are in when you are thinking about buying a home is important.  The problem is that most foreclosure properties have the electricity turned off.  Even if the fridge was clean it gets stale when the door is closed and no air is circulating.  However that isn't the problem.  Occasionally when the electricity goes off the fridge hasn't been thoroughly cleaned and as a result....well I don't think I have to draw that picture for you.

So if you are out touring foreclosures with me and I tell you "don't open that door" trust me you really don't want to open the door!

Last week my Will This Affect the Resale Value of My Home post looked at the issue with power lines and water towers as possible issues with the resale value of your home.  This week we are going to look at a serious issue in many Northern Virginia neighborhoods, foreclosures and how they may affect the value of your home.

Foreclosures vary from community to community.  In some areas you might not be able to tell a home is in foreclosure from any other for sale in the neighborhood.  In others you may find signs that announce the property is a foreclosure or see homes that who obvious signs of neglect.

So how do you know whether a foreclosure in your neighborhood is affecting the value of your property?  One of the key components of determine the value of your home when it is being sold is a professional appraisal.  In a neighborhood where foreclosures are few and far between the chances are an appraiser will not need to use a property that has sold as a foreclosure as a comparable property and there won't be any issue.  However in a  neighborhood where there have been a number of foreclosures, appraisers have to include those sales in their comps.  Most appraisers will try and discount the value of a foreclosure property but where they are a majority of the sales in the neighborhood then they will affect the value of your home.

If you live in one of the areas where there are a large amount of foreclosures you can expect to see a slight drop in your value.  It may not always be about lower prices but also about buyer's feelings about the area.  If they perceive the area is showing signs of neglect they will automatically discount the value of your property even if it is in top shape and you will need to make a tough decision about pricing your home to reflect an issue you have no control over.

A secondary affect of foreclosures in areas with HOA and condo associations is the impact of the uncollected dues and fees on current homeowners.  Usually before a property goes into foreclosure the owners stop paying their monthly HOA or condo assessments.  Over time depending on the number of unit in distress the association's budgets can take a hit and current owners may end up being tasked with making up the shortfall.   As a result association fees rise and that increase in fees may make a property less desirable to a future buyer.  Condo buildings are at the highest risk for lower values due to foreclosures as they are often the only comps an appraiser can use.

Foreclosures can affect the value of your home and you need to be aware of what is going on in your neighborhood.  A professional Realtor® is the best source of information on how many foreclosures are currently in your neighborhood, how many have sold and current strategies for getting your home SOLD in today's market.

More information on Northern Virginia Foreclosures

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As an Associate Broker with RE/MAX Allegiance in Northern Virginia and native of the area I can assist you whether you are buying, selling or renting a home anywhere in Northern Virginia. For more information about the area or my services you can check VaRealEstateTalk or my Northern Virginia website.

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