This past week I received multiple offers on one of my bank owned, REO properties in Big Bear. The first offer to arrive was a full price offer with the buyer getting a loan. The buyer was putting 20% down, was pre approved by a local lender in Big Bear, and showed proof of funds for the amount of money he was going to put down. Generally speaking, that’s a pretty strong offer. The next offer to arrive was a cash offer for far less than the asking price. If you were the asset manager of this REO property, what offer would you take?
To make a long story short, the asset manager was much more interested in the cash offer than she was the offer with a loan. After going back and forth with a couple of counter offers, the cash offer was accepted. The asset manager could have received more money had she gone with the offer with a loan, but she chose to take cash. Why do you think she did that?
Most buyers and sellers are not aware of the changes put into place for appraisers. As of May 1, 2009 most appraisers must comply with the rules and regulations put forth by the Home Valuation Code of Conduct or HVCC. In the past, the mortgage broker would simply call his or her favorite appraiser to do the appraisal for the new loan. With the new rules put into place by the HVCC, the mortgage broker must now submit the appraisal order to an Appraisal Management Company (AMC). It is the AMC that then orders the appraisal from a pool of appraisers. Now this idea may work well in Victorville or San Bernardino where you have blocks and blocks of tract homes. But when you try to this in Big Bear, it doesn’t work. To start with, you want an appraiser who has Geographic Competence for the area that he is working. Bring up an appraiser from Moreno Valley who does not have Geographic Competence for Big Bear is a disaster waiting to happen.
Geographic Competence means knowing the difference between a cabin in Sugarloaf and a cabin in Big Bear Lake. Geographic Competence means you know the difference in value between a cabin in Erwin Lake and Big Bear City. After all, they have the same zip code! Every day I hear stories from Realtors in Big Bear telling me how the appraisal came in low on properties. These are homes that the realtor has multiple comps to support the value of the listing. These appraisals are coming in low because the appraiser doesn’t have Geographic Competence.
With the new rules put into place by the HVCC, it is no wonder that sellers are more inclined to take a cash offer for less than the listing price over a full price offer with a loan.
In closing I want to state this as simply as I can. CASH IS KING in Big Bear!
True, unless you get to some of the best properties. I've seen cash buyers competing against each other as they are all going after the same properties. Cash is king the majority if the time.
Posted by: Tyler Wood | August 27, 2009 at 10:09 PM