REO Market Hot! Hot! Hot!

The REO market in Utah is heating up.  I have placed several offers in the last few days with multiple clients.  I keep hearing the same thing from the listing agents: "You are in a multiple offer situation.  Give us your highest and best offer."

Since the REO game is mostly for cash players, where is this cash coming from?  Frankly, I have no idea.  What I do know is that the number of players in the market is increasing and shifting the dynamic on how to bid on these properties.  Que today's chart please....

 
To get a feel for what buyers can expect to purchase a wholesale (sub $70K) property for, I took all the sales for the last year and figured out the difference between the list price and the closing price.  I wanted to see if there was a trend in the numbers.  I slapped a 7-sale moving average in and presto!  Its not perfect science but it helps us get our head around whats happening out there.  This chart is in chronological order according to sale date.

My gut told me in July that there was something wierd going on in the market.  I placed two offers on bank owned propety then and felt like I was fighting for table scraps with the other dogs. As we can see in this chart, July was a highly competitive month.  Then in August there is a big lull with buyers getting some significant discounts.  Since then there has been a steady run up to November which was also highly contested. 

I have been bidding on properties with my clients but we have been very particular about the area in which we are bidding.  We are also sensitive to property condition.  This chart includes all areas of Weber County so some of the heavier discounts have been for properties in rough neighborhoods.  Also represented here are properties that were "too rough" to bid on but were bought by somebody anyway.  I keep telling my clients "the joke is on that guy" for paying too much for a lemon. 


Another thing to consider is that some of these properties are being purchased by owner occupants.  No investor can compete with an owner occupant.  They will be outbid everytime.

Perhaps January will bring another lull and another window of opportunity.  In the meantime, we need to sharpen our senses and prepare to compete.