How Do Banks Price Foreclosures?
Foreclosures are properties that banks own because the mortgage borrower defaulted on his loan. Banks want to recover as much money as possible by selling foreclosures. Banks often list the property for sell through real estate agents in hopes of obtaining the amount it is owed on the property.
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Appraised Value
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The bank will acquire an appraisal of the foreclosure property. The appraisal is conducted by a licensed appraiser, who will assess a value to the house based on its characteristics. According to Bank Foreclosure Sale, foreclosures may be sell for 30 to 60 percent below market or appraised value.
Values of Neighborhood Homes
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An assessment of homes in the neighborhood can be a good indication of how much the bank can recover by selling the property. Neighborhood qualities and home values will affect the value of the house the bank is foreclosing on.
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Amount Owed on Mortgage
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When pricing a foreclosure, the bank wants to recover as much of its money as possible, so the amount owed on the mortgage is taken into consideration when pricing the foreclosure. Banks will usually price the foreclosure on the loan balance and gradually reduce the price until it is sold.
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References
- Photo Credit house image by Byron Moore from Fotolia.com
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Comments
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Mar 09, 2011
I found a house I liked listed for $125K. The realtor said it was a short sale and warned it could take a while. I offered $125K stipulating $20K be set aside at closing for repairs and updates. I later found out the pay-off was $137K. I was told the seller had permission to list the short sale. (Why it wasn't listed for $140K to at least break even is beyond me, but o.k.)Now I find the bank is ready to order an appraisal. Am I to believe, by reading this article, that the bank may accept my $105K if the appraisal comes in at $125K?
