The man who lived nearby knew the bank had been trying to foreclose on the property. He did some research on the foreclosure at the courthouse and discovered that the bank had successfully foreclosed on the land. Knowing it had to be listed somewhere, he went online and searched through all of the properties for sale until he found the listing. To his surprise, it was priced well below its market value. Had the bank and agent not made these mistakes, the two initially interested buyers would have made offers and likely started a bidding war. There is a good chance the two buyers would have driven the price up to the fair market value or beyond. Most bank-owned properties are priced below market for a reason. Banks will discount homes they sell because they sit empty for months, and the banks typically have no knowledge of their condition. In this case, though, the bank missed a full-price sale and lost at least $33,000! The property was acres of raw pasture. There were no unseen problems with it. The eventual buyer had lived down the road from it for years and was very familiar with it. He submitted their asking price, and the bank accepted it. He saved $33,000 because the bank’s agent didn’t perform well and substantially underpriced the property. The bank suffered a significant loss, and the buyer got a steal.
ERRORS IN PRICE ADJUSTMENT ARE COSTLY
There are times when pricing adjustments may need to be considered. For instance, let’s look at Tim and Sue’s situation.
Comparable Home A: $368,000 Comparable Home B: $349,000 Tim and Sue’s Home: $345,000
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