REOMAC’s Newest Member

I cannot believe it’s been almost five years since my most recent blog post here on Foreclosure Exposure!  As any close watcher of the default industry will tell you, the REO business is a shadow of its former self in most parts of the country.  The volume just dried up and blew away, especially here…

What to do in a Multiple Offer Situation

One of the most-read blog posts I have written on here is about how to lose at highest and best offers.  I want to take a few minutes here and sort of do a follow up, because I’ve been handling a few multiple offer situations in the past week – I had three properties get a whole slew of offers, so all week long I’ve been working with a number of agents, taking phone calls, e-mail inquiries, offers, and highest-and-best offers.


Here’s the thing:  I keep all offers confidential.  That is to say, if you put an offer in on one of my properties, I will not tell anyone else anything about that offer – not the price, terms, nothing.  I do this because in most cases I am instructed by my clients to keep the offers confidential, in other cases this is only implied, and when it is not implied, I keep all offers confidential because I think it makes the most sense to do so.

So here I have all these offers on these properties last week, and agents call me up, and they ask:  hey, is it too late to put in an offer?  I tell them no, not at all – we are doing highest and best offers right now, so please put in your highest and best offer.  They ask what price they need to come in at – and I tell them my standard line:  all offer prices and terms are confidential, however, given that we already have, say, 6 offers, they should be prepared to be competitive.

If you are a buyer and you want to put in an offer on a property that already has six offers, the question to ask yourself is:  is this offer going to beat out 6 other offers?  Will my offer be the best of seven?  Given that they are already doing “highest and best” offers – you won’t get another shot, you have one chance to offer on the property.

What surprises me is how many buyers, given this situation, will come in under asking price.  It’s amazing.  I am going to say something which if you are a buyer, I want you to take a deep breath, and stare at the next sentence for a minute:

I have never seen an offer below full asking price win in a multiple-offer situation.

Never.  Not even if you are competing against just one other offer.

Now, some buyer out there can doubtless claim that they have done just that.  And I am sure there are agents out there who will tell you that this can happen from time to time.

I have never seen it, though, and I have to say:  it is a losing strategy. If you are going to play the multiple offer game, why play to lose?

What also is amazing is that when I tell agents that their buyer’s offer needs to be competitive to beat out, say, six other buyers – they come in only at full price.  I really hate to try and make rules or formulas for figuring out how much to offer.  But if we are talking about a winning strategy, here goes one:  if you want to win in a multiple offer situation, come in something over asking price.  This is not a rule, but I’m going to put this out there:  if you are competing against 3 or more offers, you need to come in over asking price to be competitive.

Now, I shouldn’t really be telling anyone any of this.  Why?  Because if people took my advice to heart, they would realize the futility of writing up weak offers in a multiple offer situation.  The number of offers that I get on my listings feeds the hysteria and drives the price higher, which is good for my clients  – and good for me, since I’m paid on commission –  except of course when the bidding goes up high over my BPO value, but that’s another story.

#1 REO Agent in Santa Cruz County 2010

I’m a forward-looking guy – that’s why I got into the REO business, after all – so I usually don’t spend too much time looking at what’s gone by.  In this case, though, I’m going to make a bit of an exception, since it happens to be kind of flattering for me.

At my brokerage’s holiday party last December, I was talking to Ruth Bates, one of my colleagues at Thunderbird Real Estate.  She told me something that kind of surprised me:  she had run the numbers, and I, Sebastian Frey, was the #1 REO Listing Agent in Santa Cruz county by unit volume for the year 2010.

Ruth was instrumental in getting my brokerage to run an advertisement in our local newspaper congratulating me and other Top Performers at Thunderbird.  Here is a copy of part of that advertisement;


All I can say is, wow!  That’s an old picture of me!  🙂

I should say that I have not verified the claim that I am the #1 REO Agent in Santa Cruz county.  It wouldn’t surprise me, since I do work very hard and I do a tremendous amount of business here – but I have a lot of very good and also very busy competitors, so you shouldn’t be expecting me to rest on my laurels.

Looking forward to 2011 I hope to remain on top and grow my business further still.  I love a challenge, which is why I love the REO Business.

Wishing you all the best in the coming year!

Real Estate Prices plunge 5.9% in two months

Here’s a real eye-opener for you:  Clear Capital is reporting that nationwide, real estate prices have declined 5.9% in just two months.  This perhaps comes as no surprise to anyone who follows the real estate market closely – except that a lot of people who do follow the market closely are saying that prices are stabilizing and we’re on the road to recovery, etc.  As with anything, caveat emptor, and I wonder who signs their paychecks?


This news comes on the heels of an interesting conversation I had with a veteran broker in our area.  As it happens, I met Vince Brown over the weekend, and he’s the guy who originally started my brokerage, Thunderbird Real Estate, back in 1964.  I asked him, “So what year did you actually get started in Real Estate?” and he said 1962, which means he has been doing real estate for forty-eight years here locally.  “Wow, ” I said, “that’s a long time.  And in that time, how does today’s market compare to other markets over that time?”  Vince didn’t take but a moment to answer:  “This is, by far, the worst real estate market I have ever seen.”

Worst real estate market, by far, in 48 years.  For what it’s worth, Vince also forecasts the market will remain in its current doldrums for another couple of years, and then slowly begin to climb its way back up the appreciation ladder.

I wonder, though, how many more rungs down are we going to drop in these next two years?  Declining prices can mean only one thing:  still more defaults and foreclosures.  Analysts have long cited negative equity as the primary driver of “strategic default” – so as homeowners increasingly fall into a negative equity situation, we can expect the foreclosure pipeline to grow.  Which itself may have a further dampening effect home real estate prices.  A truly vicious cycle.

Steady as she Goes Down, September 2010 Real Estate Market Notes

After what seemed like an agonizingly long time, IndyMac/OneWest Bank assigned me an REO listing a couple of weeks ago.  The property is presently undergoing a personal property eviction, so we won’t get started on the BPO for a little while yet.  Even though I’ve sold lots of houses in the area, the market is ever-changing and it’s important to keep up on the latest fluctuations.  The bank’s automated system wanted me to go out and do a weekly occupancy check and report back – silly, maybe, on a house known to be vacant but I have a policy of checking every property weekly regardless.  I thought I would make best use of the trip by also going and checking out the competition, and seeing some of the recently sold comps.

I should mention, this is a rural area – pretty much farm country, or horse country maybe.  Given that its a rural setting, it’s always a challenge to find any two properties that are actually “comparable” – since there is such a wide variance in age, style and quality of construction, lot size and utility, access, distance to urban amenities, and of course good old-fashioned economic obsolescence courtesy of amenities like high tension power lines and noise pollution from nearby highways and bi-ways.  But if you look at enough “comparables” you can get a pretty good idea of a subject property’s value by using back-of-the-hand matched-pair analysis and my personal favorite, the principal of substitution.

I checked out over a dozen properties yesterday, and I also e-mailed a few agents to ask about what kind of activity they had had on their listings – offers, threats of offers, inquiries, etc.  One of the agents wrote back and told me something pretty interesting – he’d been on the market a couple of weeks, and they had four offers.  The seller had rejected three of these offers and was negotiating the fourth.  All four offers had come in under asking price.

It’s kind of unusual to have a multiple offer situation and have all offers come in under asking price, to say the least.  It’s especially interesting when, of all the dozen or so houses I had gone to see, this particular house was the one I thought was by far the nicest/best deal – but everyone is coming in low?  Granted, it was also the most expensive on the list – but was the newest, had the least deferred maintenance, highest functional utility, etc. – and it was not all that much more expensive than the competition.

And the agent for this property added a bit of commentary which was totally unsolicited:  “Definitely like a big slowdown.”

Well that’s a nice juicy anecdote!  It does jibe with my own experience, which is that I have listings that are languishing, attracting no offers (even though fairly priced against the comps) – or attracting low-ball offers.  So what’s going on here, has the market fallen off a cliff since the expiration of the federal home-buyer tax credits?

Nationally, I do believe that is the case.  NAR (the National Association of Realtors, natch) reported in July that nationwide, home resales were down 27%.  I don’t believe they have posted their August numbers yet.  But how are we doing locally?  I have some freshly crunched numbers for you, served up hot and fresh:

Santa Clara County


Santa Cruz County


Monterey County


As you can see, in each of the counties that we service, the median home price is up year-over-year (especially so in Santa Clara and Monterey counties) – and the amount of “active” inventory (not under contract/pending sale) is down considerably in each county.  But, crucially – so is the number of sales.  We can clearly see that year-over-year, the sales volume in all three counties has dropped considerably.  One can take heart by looking at month-over-month sales numbers and see that at least in Santa Cruz and Monterey counties there were more closings in August than in July, but I have long felt that month-by-month numbers are much less useful than year-over-year.

It’s clear that the median price is rising in all counties that we service – but I would caution that this number does not mean much, as it continues to be the mix of homes that are selling which is driving the price “rise” – neighborhood-by-neighborhood, I don’t see much in the way of upward price pressure – quite the opposite, in fact.  While our “Days on Market” is generally pretty healthy across all three counties, I see the declining sales volume as strong evidence which, when coupled with anecdotes from myself and other agents, indicate that we may be setting ourselves up for a grim autumn and winter selling season.

What do you think?  Comments are welcome!