Humans make mistakes, we all have done it. Sometimes though you run across mistakes that not only makes you scratch your head, but also costs innocent people a lot of money.
A bank recently made that mistake in a Mesa condo community, and that mistake lead to another and now the whole community will be suffering. There is a two Mesa condominium communities that are right down the street from each other. For this post we will call them Tree 1 and Tree 2. While the two communities are right down the street from each other, they were built about 20 years apart. Looking back over the last year you can see that Tree 1 Condos, which were built around 1980, are selling for about $60,000 on average. But down the street at Tree 2, which was built around 2000 as a gated community with a beautiful new pool, condos sell for closer to $150K.
So a few weeks ago a bank takes a new foreclosure property from Tree 2 and puts it on the market to the public. The agents and appraisers do a BPO (Broker Price Opinion) on the property and the condo in the $150K community goes on the market for $66,700. No need to say, that condo went into pending pretty quick. Now bank 2 has a unit in Tree 2 and they want a BPO done on the property. When we prepare BPOs for the bank, the bank wants us to only use compatibles from the last 90 days. If there are not enough comparables from Tree 2 they require us to go outside the development and look for more. We advise the bank to be careful, there are two areas close to each other, but they are not comparable properties.
Despite our warning, the bank sees the above mentioned unit that sold for $66,700 and the other Tree 1 units in the mid $50’s and puts the new foreclosure property on the market at $59,000, which is about $80,000 less than the actual value of the property. Again, needless to say the first day the unit is on the market the phones have been ringing off the hook. Not only is this mistake costly for the banks, it is also costly for the individuals living in Tree 2. There are now two properties in a row that sold for less than half what their fair market value is because of a sloppy mistake that could have easily been avoided.
Now what about that next round of bailout money for them banks.
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