A recent New York Times article about the economy is helping put the Federal Reserve’s surprisingly large interest rate reduction on Tuesday into perspective, and does a good job of explaining that while the cost of fruits, vegetables, clothing, vehicles, and (most important in our world) houses, are all dropping, these declines have raised fears of a deflationary spiral. “There is good reason to fear deflation. Once prices start to fall, many consumers may decide to reduce their spending even more than they already have. Why buy a minivan today, after all, if it’s going to be cheaper in a few months? Multiplied by millions, such decisions weaken the economy further, forcing companies to reduce prices even more.”

The article also discusses a phenomenon called the “sticky wage theory” explaining why wage prices don’t fall during a recession, and why this along with price drops, helps to keep “real incomes” (inflation adjusted) from dropping too much. Read full article…

Of course this got us thinking about properties that had price drops in the last few months. We’ve assembled a list of properties that have had “significant” price reductions (10% or more) in the last six months just for good measure.

The biggest decrease we’ve seen so far has been this approved short sale in Revere originally listed for $399,900 currently offered at $185,000, a whopping 54% reduction. Suprisingly, it looks to be in unbelievable condition! Have a bit more to spend? Check out this mini Waterfront mansion in Worcester County offered at $500K from it’s original price of $875.

I have some clients looking at bank owned multi-families in Everett and I did a little research that I thought was insightful and worth sharing. Buying from a bank is always an interesting gambit. You are dealing with a corporation who presumably owns a large (and ever growing) portfolio of real estate and while they want to get it off their books as quickly as possible they are still willing to make buyers jump through a number of hoops. The biggest hoop is the “as is” provision. I have never dealt with a bank owned property that wasn’t sold with an “as is” clause and while normally this isn’t the end of the world more and more often I am running into banks that refuse inspections outright. Not inspection contingencies but inspections. Basically you have to buy the properties blind - what you see is what you get. Of course the banks’ insistence on keeping the unknown unknown runs a property’s value down and for the super savvy this is a golden opportunity.

Ok so all that said the question my client posed to me was, “can you negotiate with the bank?”. I replied that typically it is very hard to negotiate a significant discount on a bank owned property. The banks either get their asking price or they will continue to reduce the price for the whole market until a buyer steps up. This may actually be a smart strategy but I will leave that discussion for another post. Anyways since at Territory we like to rely on facts and not just on feelings I did a search for bank owned multi-families that sold in Everett over the last year. Here is what I found…

14 Hawthorn St
DOM - 352
Original Price - $240,000
List Price - $202,500
Sale Price - $205,000

67 Shute St
DOM - 34
Original Price - $273,900
List Price - $265,900
Sale Price - $273,900

72 - 74 Central Ave
DOM - 171
Original Price - $446,900
List Price - $294,900
Sale Price - $290,000

81-83 Reed
DOM - 61
Original Price - $325,000
List Price - $299,900
Sale Price - $304,900

4 Sherman Street
DOM - 109
Original Price - $378,900
List Price - $354,900
Sale Price - $355,000

31-33 Waverly Avenue
DOM - 16
Original Price - $359,900
List Price - $359,900
Sale Price - $359,000

7-9 Bucknam St
DOM - 7
Original Price - $389,900
List Price - $389,900
Sale Price - $389,900

90 Bow St
DOM - 511
Original Price - $850,000
List Price - $674,900
Sale Price - $650,000

Of the eight listings that sold six (75%) sold for asking price or better. Of the remaining two, one sold for $4,900 (1.6%) less than asking and one sold for $24,900 (3.7%) less than asking.