The numbers tell the story. While distressed properties (bank-owned and short sales) are only 18% of the total active and pending listings, over the last 6 months, they’ve constituted over 38% of the sales. They are defining the market and will continue to influence the market for, well I believe, many years. That said, we are seeing an increased number of sales in residential properties and stabilizing prices.
Cash sales are still big in the market as lending is difficult. Banks do have lots of money to lend but they are cautious about who they lend to. Interestingly enough, when looking across the price range, cash is predominate for sales under $100,000 and over $2.5 million. Throughout the middle ranges, it is a pretty consistent mix with just a slightly higher number of cash sales over $1.5 million.
Are Distressed Properties a Good Deal?
Each property is different. Sometimes bank-owned properties have not been lived in for years and there is a lot of work needed. Short Sales are often in better condition and sometimes even better than normal sales in the same price range. I recommend that buyers look all types of homes to find what is best for them. The chart below summarizes the average $/sq.ft. across the price groups ($100k each). In all cases except one, distressed properties were on average lower priced per square foot than normal properties. We do know that there is a much higher ability to negotiate less than list price when it is a normal sale. Bank-owned properties on average sell for 99% of the list price! That means that many sell for over list price. The average sale to list ratio is 96%; this has been steady since I’ve been in the business.
Insider Tip: If you have a home to sell, get it on the market at a competitive price now. Rumor is that there will be a large number of foreclosures come on the market after March. So I predict a strong sales through May (Jan-May is peak season for us) with market declines after that.