Are Banks Being Too Aggressive Selling Foreclosures?

Last week, I was sitting at a closing and was talking to the listing agent that does mostly foreclosure listings. My client had bought a house that had been on the market for some time. It originally started out at one price (probably a little high at the time). Over time, the listing was reduced and reduced until the price began to attract some buyers. In this case, my buyer made a bid that was accepted and we closed within five weeks of the offer.

I explain this process because it seemed to be the right process in allowing a little time for the real price to be established. Now let's back up to my closing last week. The other agent, as I said, works mostly with foreclosed listings. She had just put a new listing on the market that was a five bedroom house with an unfinished basement for $128,000. This house was in the Dacula HS cluster. She told me she had eight offers the first day. In my opinion, this is an irresponsible way for the bank to sell a foreclosure. The price should have started out much higher and then worked its way down over time if no buyers made offers. This process may have taken a little longer, but it would not have been a low-ball price ruining the pricing of an entire neighborhood for future sales.

What is the lasting effect? When a family wants to sell their house in a traditional manner, their house has to compete with these low prices, creating false expectations from buyers in trying to grab an incredible deal. If they are lucky enough to get a contract, the house will have challenges appraising. So what is the lasting effect? If traditional sales cannot be accomplished, we will have more and more foreclosures. Banks need to be more responsible and more patient in pricing new listings. This is the only way we can begin to work our way back to a healthy real estate market.