The future of bank owned property is probably a bit different than one would have expected. Currently, properties that are owned by the bank are listed with a relo specialist, and the property is managed by an asset management company (AMC). The AMC takes care of the property till the date of close. The bank will accept all offers, choose the highest, and then go to close.

This system is changing and it’s changing fast. Most of the properties that are owned by banks typically aren’t in the best of shape. These homes are very rough with a lot of work needed in order to get the home to a move-in-ready status. Typically the homes are missing appliances, carpet, walls are missing paint or have holes in them, and overall the home will need some serious work before a customer can move in. This is fine for a first time home buyer that wants to put some elbow grease into making it their new home.

With bank owned properties we are constantly hearing, “taking highest and best” by some date. It’s by far the worst way to conduct real estate, but unfortunately, you can’t expect much more from banks. When the highest and best deadline comes around we’re seeing ten or more offers and many of them are often ten to fifteen thousand over the asking price.

The future of bank owned properties is moving towards a complete removal of the asset management company. How are they doing this? Welcome to online auctions. Every day bank owned properties are being sold through online auctions. These auctions take a week to go through the bidding steps. They are still seeing ten to fifteen thousand dollars over asking price for these properties. There are a few differences though with the online auction versus the standard real estate offer.

First only the buyer can bid on the auction. The agent must register to join the auction and the buyer must acknowledge the agent that’s registered in order for the agent to be paid. In order to bid, the buyer must first put up 2500 dollars of their own money. If they lose, it is refunded and if they win it goes towards their down payment. The banks are no longer paying any closings costs, which means the buyer needs to have 2-3% of the purchase price available in liquid funds. Overall, this means the buyer, if they go FHA, will need 6.5% to purchase the property. No exceptions. The commission paid to the selling agent and the listing agent is only 1% versus the standard 2.8% which is the norm for Colorado.

Overall banks are saving money by removing the asset management companies from the deal, not helping with closing costs for the buyer, and reducing what we see as the norm of 6% total commission in Colorado to 2% total.

In the end, the buyer is paying more money for the property with bidding wars in the last 15 minutes of an auction, having to have 100% of their own closing costs in order to purchase the house, $2500 in order to bid on the property (which is more than the usual $1000 to $1500 for earnest money when submitting normal offers), and the buyers agents are making around 1.8% less in commission for the property. The future of bank owned properties is looking very bleak.

Marc Bayes is a Broker Associate with the Colorado Dream House Team, Keller Williams Realty DTC. Contact Marc at 303-619-3052,, or  

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