Bank Owned Real Estate Piles Up from The Morning News
Last updated Friday, May 30, 2008 7:00 PM CDT in Business
By Kim Souza
The Morning News
Northwest Arkansas grapples with record foreclosures and banks and mortgage lenders find their real estate portfolios growing. It’s a combination that has some buyers presenting lowball offers.
“I have never seen buyers so educated. Many are not looking for just a good deal, they often want a steal,” said Vickie Briolet, real estate agent for Crye Leike Realty in Rogers.
There are nearly 400 bank owned homes in Benton County and another 390 properties set to auction in the next 30 days according to Realtytrac.com. Briolet said there are so many distressed homes on the market it’s hard to find properties in some price ranges that aren’t.
She said there are good deals for patient buyers, but closing in a timely manner has been a problem.
Her experience indicates many bank owned properties involve cumbersome closings that could be streamlined to more effectively move the property.
Briolet recently worked with a couple who relocated to Northwest Arkansas because of work. She said the couple was shopping in the $300,000 to $400,000 price range and looking for a good deal. The fully-qualified buyers with stellar credit and a substantial down payment found a bank-owned property and submitted an offer. The needed a quick turnaround.
“We waited two weeks only to have the bank turn down their offer. That house still has not sold. This left us scrambling to find another home in their short 30-day window for closing and moving,” Briolet said. “You would think with the sheer number of bank-owned properties out there that financial institutions would find some way to streamline a process to get the property sold.”
Joanie Stell, a relocation director for Coldwell Banker Faucette Real Estate in Fayetteville, said bank-owned properties take longer to close.
Home Steps handles mortgages foreclosed by Freddie Mac and has up to 45 days to work out a closing, Stell said. This is information prospective buyers who are bargain house hunting need to consider, she said.
Stell said many bank owned properties are also “sold as is,” which means if problems are discovered in the inspection, a buyer will likely want to re-negotiate the sales price, which can take several more days.
Stell, who processed 210 relocation transactions in and out of the area last year, said many house hunters don’t have time to purchase a bank- or corporate-owned property, but want the bargain basement price.
Briolet said many bank-owned homes in the region belong to national lenders like Countrywide Mortgage, Citicorp and Wells Fargo and require long distance negotiation.
Larry Kelly, a broker and real estate veteran in Bentonville, also has expressed his own concern about how banks and mortgage lenders handle the situation.
Kelly, who survived the real estate meltdown in Houston during the 1980’s oil and gas bust and also the savings and loan crisis, said local banks are not employing any of the strategies he saw during those dire times. He said banks could do more than simply take the write down and put the property back on the market at a lower price, which ultimately reduces the price of neighboring properties.
Most of the real estate owned by local banks is typically new construction financed for area builders or developers now bankrupt. At the end of March, 22 banks doing business in Northwest Arkansas reported a total of almost $117 million in real estate owned among them. This compares to $46 million in real estate owned a year ago.
Kelly said some area bankers, anxious to unload the property, reduce the price as much as 20 percent – a builder’s cut – to move it off the books.
“In the 80’s, bankers weren’t so quick to dump the property. Many would refinance it for qualified buyers which was better for the bank and better for the overall market,” Kelly said.
Area bankers said they have been able to move some property quickly. Unfinished property and residential developments off the beaten path present more of a problem.
Four bankers contacted on the issue said they do not employ a blanket solution to moving the real estate off their books, but look at each situation independently.
Kelly was recently surprised to find a local bank reject an offer priced $28,000 below the asking price, but at the mortgage payoff amount. The property had been on the market for more than a year and the offer was the highest received on the property, Kelly said, but the bank was unwilling to take the shortfall.
That seller now faces foreclosure and bankruptcy, which results in all parties losing, Kelly said.