I want to state right up front that what I do not believe that what I’m about to write is the case in ALL circumstances, but I believe it to be the circumstance in some.
Let’s say your neighbor’s home is foreclosed upon. The bank will hire a real estate agent to perform a BPO (Broker Price Opinion) and pay them a small fee to complete the price analysis. Once that analysis is complete, that agent, or another put the home on the market. The listing agent is oftentimes asked to take a reduced commission by the bank. Because of that, some of the normal services rendered in marketing a property are not completed. For instance, let’s say the listing agent prices the home correctly, but omits that the home has a terrace level or makes a mistake on the lot size. To buyers, the home appears overpriced or unappealing. So, it sits on the market, unseen and unsold. For months. As it continues to languish, the listing agent doesn’t take new photographs to show that the season has changed from summer to fall. The agent keeps updating the bank, and the bank, needing for the property to be removed from their books, takes the agent’s advice and reduces the price repeatedly. Finally, the home is priced competitively for one with no terrace level and a small homesite. Buyers show up, realize it’s a steal, and buy the home. Meanwhile, you decide to refinance your home because interest rates are low. Unfortunately, you can’t, because your neighbor’s home sold for $50,000 less than it’s true market value and your home won’t appraise for what you owe.
On the other side of things, when I’m working with buyers, I try and find these little hidden gems before the price becomes competitive. I can make a case, providing comparable properties to what is listed (a home on a small lot with no terrace level), for purchasing this home at $50,000 under list price. If the bank accepts our offer, my clients win – BIG. That’s my job, to take care of my clients and try my best to put them in the best financial position possible after their transaction.