"Who is deciding on that price? "

The buyer and the seller.

It is a market.

When they agree a sale occurs.

The price as advertised, not not final selling price. I thought it was perfectly understandable what I was asking?

Brickeye - Must you ALWAYS be obtuse? Your posts are rarely helpful and almost always condescending.

A listing isn't a sale. It's what the bank hopes to get, not what they DO get. A property tax assessment isn't a sale. It's a guesstimate based on the taxes they want to collect.

Whatever price the foreclosure sells for is the price that will now be used as the comp.

Who is asking about comps?

Ok, so no one understands what I was wondering about. I guess I didn't make myself clear and the return on trying to explain it further doesn't seem worth it

Thread closed.

"Your posts are rarely helpful and almost always condescending."

So who do you think is setting the price?

The seller advertises a price, the buyer makes an offer, and if they agree a deal is struck.

sellers can consult a Ouija board for all it matters.

Like you.

Mary, are you still there? What I think you're asking is how does the bank owner of the house set the price? I think they are trying to recover a certain amount of money, and price accordingly. Also the foreclosures are often neglected and need work. Hope this helps.

The OP wasn't asking how the final sale price is determined or how you appraise the property. The OP is asking in a foreclosure situation who sets the asking price. Is it set by the lender or by the real estate agent or what? I gather from the OP's post that in her area asking prices are generally (in non-foreclosures) set close to the tax appraisal amount.

Wow

"sellers can consult a Ouija board for all it matters.

Like you."

What's that supposed to mean? Are you now calling her a witch?

As the buyer of a couple foreclosures, I think we have figured it right--the bank needs to recover what they have in the house + realtor fees. In some instances, if they can get more than what was owed at foreclosure + realtor fees, that money goes to the foreclosed on former homeowner. The real estate agent and the bank get together to determine the asking price--the bank lays out what they need to get & the agent basically advises on listing price based on comps and how quickly the lender wants the house to sell. Smart potential buyers will do their research in public records to determine how much was owed when the house was foreclosed on to figure out how much wiggle room there is between asking price and what the bank needs to get to break even. Hope this helps!

The seller of a foreclosed property has a whole lot of things in play, including mortgage insurance they might be able to collect on (for the portion of the loan over 80% loan to value at purchase), the possibility of recourse against the defaulting party (sue them for any shortfall), and other things they are not going to make public.

As a seller they are not going to tell you how they arrived at the asking price any more than any oter seller.

Did you ever tell a buyer how you arrived at your asking price?

It is up to the purchaser to perform due diligence and then make an offer.

When all is said and done, the value is what a buyer will pay.

>Smart potential buyers will do their research in public records to determine how much was owed when the house was foreclosed on to figure out how much wiggle room there is between asking price and what the bank needs to get to break even.

Sorry, but I don't follow this. In my area, there is no correlation between previous sale price and what the bank is willing to take. For instance, I've been looking mostly at townhouses in a specific complex. The last short sale that went through, the previous owner had paid 230K and the bank had it listed at 59K, which is about right. Currently there are two short sales: one where the last sale was 130K and the bank has it listed at 75K (been languishing for months at that price), and a newly listed one where the last sale was 235K and the bank has it listed at 90K.

Actual REO/Foreclosure prices have nothing to do with previous sale prices, as far as I can see. I've also been looking at a little cottage that is currently on the market for 40K, foreclosed owner paid 499K at the height of the frenzy.

So, for the OP, around here short sale prices tend to be optimistically high-ish, partly because the current owner could be on the hook for the difference between the loan balance and the sale price, but once they get into foreclosure the price is whatever whoever decides it should be to unload it quick. I don't think the realtors have much to say about this--it appears to be set from some corporate central office. Now that we're in the valley of fewer listings due to the robo-signing thing last year, everyone is asking much more. I expect that once the units held up by that start flooding back into the market, prices will drop again.

But if you're looking for pricing logic, well, at least around here there isn't much.

I think the public records to be consulted are not the previous sale prices but the mortgage notes and all the ancillary paperwork that gets filed when a property goes into foreclosure. There is usually a long paper trail that can be unearthed in such cases. From these you can draw reasonable estimates of the arrearages and remaining principal, etc.

L.

Banks of foreclosures set the price by getting BPOs (Broker Price Opinions)on the properties. Most banks will get an appraisal too.
With Short Sales, the owner of the home and the agent should set a price based upon what the market value is and then reduce accordingly to get a fairly quick offer. Most of the time, the lenders of these short sales will not give a price. They will not consider a sale until an offer is given to them. Then, they come up with a counter on the offer. The lender will probably order a BPO to be performed, prior to responding with a counter. This way they don't have to take the word of the buyer, seller nor agent.
I don't understand DreamHome's post either. In most of these sales the bank has NO wiggleroom, theoretically, because they start the deal upside down.
The banks are, at least here in Charlotte, are wising up and are pricing these foreclosures more in line with the market rate average. I am finding real deals harder to get. A lot of these foreclosures are just as nice or more so than the competition, so why not sell them for as much as they can.

There is no "one way" that all banks operate just like there is no way that all sellers operate.

In general though, most large banks have entire teams of people devoted to foreclosures. They will also have numerous realtors that they have ongoing relationships with. So, in practice, there might be numerous layers of "decision makers" all signing off on a sale price. The quality of decisions made in that fashion tends to gravitate towards the least competent person in that chain, so you can see how they might end up with strange prices.

"In general though, most large banks have entire teams of people devoted to foreclosures. "

How the note holder sets their asking price is rather unimportant.

How much are you willing to pay is important.

What is the property worth to YOU?

Sellers can try and ask for any price they want.
How they determine that price is up to them.

What are the buyers willing to pay?

Price it high and you get monthly carrying costs.
Price it low and you may lose more than you want.

It can even depend on how well capitalized the bank is, since the value if the asset has fallen from the value of the performing loan to the market value of the foreclosed property.
A performing loan is an asset to the bank, and can be counted in their reserve requirements.
A non-performing loan cannot be used to meet reserves.
More capital is then required.

"How the note holder sets their asking price is rather unimportant."

I think it's extremely important, because that determines how long the owner has to sit on their assets in a declining market (my market is still declining).

"Price it high and you get monthly carrying costs.
Price it low and you may lose more than you want."

I would say you already answered it.

I think he meant that it really has nothing to do with what a buyer should pay.

nc has it.

How a seller determines prices is not of that much value to the buyer, especially in a foreclosure where things like PMI come into play for the seller.

If the seller knows part of the loss wil be covered they might ask less and go for a faster sale.

That does not have a lot of bearing on the actaul value of the property, is creates a limited circumstance that is not generally applicable to valuation.

That is why foreclosure prices are often marked on government tax web sites, and may not be good comps for ANY other transaction.

"That is why foreclosure prices are often marked on government tax web sites, and may not be good comps for ANY other transaction."

In high REO owned areas like Las Vegas or Stockton etc., appraisers use foreclosures as comps if they are in the majority.

p.s.
I look at it this way:
Seller determining what the buyer "should" pay.
Buyer determining what they "would" pay.