Are Foreclosures & Short Sales a better buy? The Lexington Oaks Example.
People call me all the time saying “I want to buy a foreclosure”. The calls tend to spike when Oprah talks about the issue. While there are many hidden costs to purchasing a short sale or a bank owned foreclosure, are they still a better deal? Leaving aside the uncertainties of short sales and the disrepair of foreclosures – can you really steal one of these homes?
To find out, we will dissect recent sale data in Wesley Chapel’s Lexington Oaks, a bedroom community just North of Tampa. Lexington Oaks was built by Pulte Homes from 1999 to 2004. Between January 1 and July 16, 2009, there were 30 closed sales of single family homes in Wesley Chapel’s Lexington Oaks:
- 21 were sold by normal homeowners
- 2 were bank owned (foreclosed / REO homes)
- 5 were short sales
- 1 was owned by a corporate relocation company
- the highest sale price was $298,000
The 21 homes sold by normal homeowners sold:
- for an average price of $179,776
- for average price per square foot of $89.09
- for 95% of the final listing price (5% discount)
- in an average of 133 days on market
The short sale, bank-owned, and corporate relo homes sold:
- for an average price of $180,544
- for average price per square foot of $82.31
- for 99% of the final listing price (1% discount)
- in an average of 169 days on market
While this is a small dataset, the raw numbers indicate a slightly better price per square foot on distressed sales. However, a closer look at the homes reveals that 6-out-of-7 pool homes were normal homeowner sales that had a higher price per square foot and skewed the data. If we normalize to account for the pool homes, the price advantage of distressed properties evaporates. We will check this data against other Tampa Bay area neighborhoods in future posts.
Another eye-popping statistic is the list price to sale price ratio. I have to restrain from laughing when people call wanting to offer 50% less than the asking price on a bank owned property. This data set is typical of our recent experiences when trying to negotiate with banks on already low prices: the average home sold for 1% less than the final listing price. If we expand the study to look at all bank owned (REO) sales in the Wesley Chapel’s 33544 zip code during the same period, the average REO home sold for 2% less than asking price.
Curious about how these numbers compare to the market peak of 2006? If we look at Lexington Oaks home sales during the same period in 2006, there were 60 homes sold:
- for an average price of $291,446
- for average price per square foot of $142.83
- for 97% of the final listing price (3% discount)
- in an average of 66 days on market
- the highest sale price was $500,000
Prices are down 38%! While it is possible to make a great buy on a short sale or foreclosed home, this data shows that normal homeowner listings should not be ignored. Act now to take advantage of a great selection, low interest rates, low prices, and the $8000 first time home buyer tax credit. Contact Team Bohannon at Coldwell banker at (813) 979-4963 today.
- by Dale Bohannon
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