Distress Home Sales
Many buyers in today’s market seem to be interested in purchasing “distressed properties”, rather one that best fits their needs for a home to truly enjoy. There are opportunities were you can achieve both. Distress properties on the market are categorized as Short Sale, Foreclosure, or Bank/Lender Owned.
The hype seems to be FORECLOSURES! But, you do need an understanding of the different categories of real estate properties that are In Distress.
Properties “In Foreclosure” are in the process of being foreclosed and the owner (seller) is still holding title to the property. They are listed in our real estate multiple listing service (MLS) as “In Foreclosure”.
Then we have the properties where a bank/lender has completed the foreclosure process and now hold title to the property. They are now the Owners! In MLS these properties are listed as Bank/Lender Owned. Banks/Lenders do NOT want to own real estate and want to get rid of it!
Properties listed as Short Sale Potential is where the Seller’s loan on the property is for more money that what the property can sell……they are “upside-down”. In order for there to be a sale the owner has to be able to absorb the loss themselves. Their financial situation may be such this is not an option. In such case, the owner needs the lender to absorb the loss in a sale and the property is listed as a Short Sale Potential.
So which category has the most potential for you getting the best buy? In my research to provide you with the most accurate comparison, I searched sold distress homes since July 2011 in Leon County. To keep the results on a “common basis” I limited my search to homes with the following criteria: 3+ bedrooms, 2+ full baths, 1600 to 2000 sq. ft., and no pool. There were 44 homes sold that were Short Sales at an average price of $166,191. 40 homes sold that were Bank/Lender Owned at an average sold price of $115,360. Homes that had been listed as In Foreclosure were included in the Bank/Lender Owned sales. The average sold price of the Bank/Lender Owned was 30.6% less than those homes sold as Short Sales.
But, “hold your horses”, it is not as simple as that! A big factor is Location as has always been the case as well as other considerations such as price range. Using the same “common basis” as above, 275 homes not in any distress were listed for $198,191 and sold for $192,079, a sold/list ratio of 96.6%. The 44 Short Sale Potential listed for $166,191 sold for $159,768 with a ratio of 96%. The 40 Bank/Lender Owned listed for $123,445 sold for $115,360 a ratio of 93%.
The bottom line, are you looking to buy a house as an investment or a home you and your family will enjoy. Optimally, it will be a combination of both. Statistically the bank/lender properties are the best buy and a lot easier than going after a short sale that may not work and the time it takes to close. The bank/lender owned home is easier, quicker transaction and has a seller that has no personal attachment and more a willingness to negotiate the price.