[quote=pemeliza]”For example, note the house on Bolero in 92009 that recently went pending (the modern, white one with 1/2 acre and view). The flipper bought it for ~$645K, IIRC, and without doing any renovations (I prefer they NOT do renovations, for the same reasons stated by other posters in this thread), put it on the market in the high $900K range and it’s pending. Now, if the bank took it back instead, they could have listed it for $750K. The bank/taxpayers would have saved $100K, and the buyer could have saved $200K-$250K.”
If it is pending now for the high $900k range then how on earth would a buyer have bought it for $750k as a REO?
REO’s sell for more then flipper properties because everyone wants to “steal” one from the bank. BTW, the house on Bolero has a vacant lot sitting to the west of it. Still, if someone bought it at $645k than that was a great price.[/quote]
In an inventory-constrained market with high demand, the seller has more control over transaction/market prices. When inventory is plentiful, and demand is easily met, the buyers largely determine market prices. That’s the difference between a buyer’s market and a seller’s market. Make no mistake; we are currently witnessing a powerfully strong seller’s market.
When inventory is so low, flippers can command a premium, and somebody will likely pay it.
That’s why speculators cause a problem in a supply-constrained market. They overwhelm the demand while taking supply off the market **at a given point in time.** This is very bad market for organic buyers.
If banks were forced to foreclose on the houses (or at least if the government refused to support these banks in any way…they would fail, and inventory would be released on the market anyway), inventory wouldn’t be a problem; but from what I’m hearing, the govt is paying them to keep inventory off the market.
With the Bolero house, if the bank were to list it as an REO, and if we could get rid of all the speculation, they would get more money for it, and the buyer would pay less. That is a far better outcome than what happened with the flipper.
BTW, I don’t think people are willing to offer more on an REO than on a flip. Quite the contrary, from everything I’ve seen (and I’ve been and active observer of California real estate for decades). Of course, the banks might list for more because their cost basis is higher, but given two equal houses at a given point in time, I have yet to see people pay more for the REO than the flip.
BTW, the lot across the street is a steep slope. It’s doubtful anyone would ever build there. Even if they did, they would have to build down the hill, and it’s not likely to obstruct the view very much.
