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And the competition is fierce.

 You’ve probably heard it from family, friends and co-workers, "You should buy a short sale or foreclosure. There are some great deals out there!" Or, your friend tells you, "I paid way below market!" And to some extent, these statements have merit.

Unfortunately from a practically point, many of these "deals" may not be available to you.

Remember, what we are talking about here are short sales (sales in which the seller's proceeds will be less than the outstanding mortgage debt) and foreclosures or bank owned (sales in which the lender is now the owner and seller). In other words, banks are in the position of having the final word. And this is where it gets interesting and complex.

Enter the age old market principles of supply and demand.  The terms, short sale and bank owned sales typically conjure images of a clearance sale, and for good reason. These homes usually carry attractive (often, overly-attractive) price tags. Banks have to consider the costs of holding an unsold, non-income producing inventory or, in the case of the short sale, increasing this inventory through yet another foreclosure. That’s how they justify their low pricing strategies. In reality, they’ve come to realize that buyer activity increases when homes are priced “as a good deal”.  This has created a market where distress homes are receiving multiple offers.  Of course many times this results in a selling price over the asking price.

The result; competition can be intense for lender-controlled homes; and (another old adage here) prices which appear too good to be true usually are.

So here we have buyers with no experience as homeowners looking at homes that in most cases have not been maintained or upgraded, involved in a bidding process for homes that will be sold in “as-is” condition. 

Did I mention that many times experienced investors are involved in the bidding process as well.  What an investor has that the typical buyer doesn’t is, a) experience, b) a different mindset, an investor only cares about investment potential and c) cash.

In a market where the sellers are, well real people, the primarily concern is about money and moving.  On the other hand, banks as sellers are more focused on speed. This is because, for lenders, time is money.

More and more we are seeing restrictions attached to distress sale offerings. For example, when a bank is the seller many times they require a pre approval through their own retail lending channel.  They may offer a small discount on fees if a buyer uses their retail outlet.  A buyer must be pre approved before successfully making an offer on any property today, however, to have your offer considered by a bank seller you will probably need to get pre- approved more than once. 

And, regardless of how it “usually” works where you live, a successful buyer will need to use the banks selected title company as well. 

Most banks stipulate that their listings be sold “As-Is” with "No inspections or home warranty’s provided".

And it’s becoming more common is to see "cash only" in the listing.  This is especially prevalent with condos, either because the owner  to tenant occupancy ratio doesn’t meet lenders requirements or when the HOA is in any kind of litigation or if the property is in poor condition.  

And buyer beware on this one; I know of several bank owned listings where the buyer can’t have access to the property because there is a tenant that is being evicted.  When this is the case the bank won’t even warrant that the property will be delivered vacant.  That means the buyer will inherit the tenant that is being evicted.

What does this mean for buyers?

It's not all bad news, of course. After a couple of years of declining home values in most areas of the country, prices have become very attractive, and not just for distress sales. Further, not all distress sales will be off-limits to the traditional buyer needing to finance the purchase.

Keep in mind, with attractive pricing comes competition. It helps to remember that a home purchase is a process, not an event, and that you won't necessarily win them all. Armed with information, reasonable expectations, and knowledgeable and experienced representation, however, you will dramatically increase your chances of getting that "deal."

To be successful in this market a buyer needs to be represented by the very best agent, an agent that welcomes you as a client, values your business AND, an agent that is well qualified to help you navigate successfully through the process.

If you are in the San Francisco Bay Area, my team and I have successfully represented buyer and seller clients in San Mateo, San Francisco, Santa Clara, Alameda, Contra Costa and Santa Cruz counties for the past 10 years.

Buyers, search for all bay area homes for sale at www.AllBayAreaHomesForSale.com.  Or for short sales and bank owned properties only, search www.BayAreaBankOwned.com.

For sellers, we provide market analysis, home preparation and marketing services second to none.  Just call or email me and we’ll design a plan specific too your needs.

For a complimentary copy of my book, Let's Make a Deal, the Insiders Guide to Buying and Selling Real Estate. Just visit our website, www.BayAreaTeam.com, scroll down and look for the section Read All About It, click on the link and you will have your PDF version.  For a signed hard copy, just send me an email

We invite you to view our growing collection of short videos, slideshows and links at www.OurTeamPiks.com.