Bank-Owned Homes – Selling like Hotcakes!
March 8, 2009 by Kristin LaVanway · Leave a Comment
I recently posted about the zombies of real estate – the short sales. At the opposite side of the spectrum are the foreclosed homes, commonly known as REO’s (Real Estate Owned) or homes owned by the bank. REO’s are being listed at very competitive prices and often sell in a matter of days. In many areas, the majority of homes sold are REO’s. Here are some interesting statistics from February:
In Gilbert, 51% of homes sold in February were REO’s. Only 16% of homes listed were REO’s. Months of inventory of REO’s: 2.5
In the City of Phoenix, 81% of homes sold in February were REO’s. Only 36% of homes listed were REO’s. Months of inventory of REO’s: 2.9
In Queen Creek, 70% of homes sold in February were REO’s. Only 23% of homes listed were REO’s. Months of inventory of REO’s: 1.6
Keep in mind that 6 months of inventory or more is considered a Buyer’s market and anything less than 6 months is considered a Seller’s market. Clearly, when shopping for REO’s, you are operating in a very strong Seller’s market.
To illustrate what this means to a buyer, here’s an example. I was recently contacted by a Buyer who is interested in purchasing a home in Queen Creek. His budget is $65,000. He is paying cash and wants to close quickly, so a short sale is not an option. There are currently 35 single family homes listed in Queen Creek offered at $65,000 or less. 19 of those homes are short sales, leaving 16 homes. Well, that doesn’t seem so bad…16 homes to choose from. Of those 16 homes, several are missing all the appliances, most need at least paint and carpet. Most of these homes have no backyard landscaping to speak of, unless you really like weeds. 5 of the 16 have less than 1000 sq feet, and one of the homes was built in 1974 – looks like it needs a lot of work. When my client takes a look at the list, there will probably be about 7-8 homes that he is even interested in.
To get a better feel for the pace of the market, I looked at how many homes are under contract – in escrow, waiting to close – wow…15. Almost as many as active. And 5 of those went under contract in less than 10 days. I checked to see how many closed last month – and keep in mind, February was a short month…14! That means for this particular client, there is 1.07 months of inventory of homes in his price range and only 50% of those meet his requirements. Talk about a Seller’s market!
This is a great illustration of the difference between what the media reports and what the real story is. If you listen to the media, you would think that the Phoenix real estate market is a bargain shopper’s paradise. And it’s true, compared to last year the prices have come down a lot and your home buying dollar does go farther. But if you are looking for one of these bank-owned steals, you may be shocked to learn how challenging it can be to actually get a contract accepted. Most of the buyers I work with at the lower price ranges write many offers before we get one accepted – often in the double digits. In most cases, there are 2-3 offers on the best listings within the first few days on the market. It’s a real wake-up call for buyers who think they can come in a low ball on these bank-owned properties. And because of their perception of the market, it usually takes the rejection of a few contracts before they understand how competitive the market really is.
This pinch point – where the demand for homes greatly outpaces the supply – occurs at different price points from area to area. In Scottsdale, for example, if you are looking to spend $400K or more, you will find that the inventory of hones on the market is abundant enough – right around the 6 month mark – to be considered a Buyer’s market. But if you are looking to spend less that $300K, however, the scales tip in favor of the Seller, with only 3.8 months of inventory.
The good news is that my buyers do eventually end up with a great deal. It just takes some preparation, patience and a ninja mentality – be ready to strike with your strongest offer. And really work with your Realtor to understand the market – it is essential for success.
![[Facebook]](http://hereinphoenix.com/wp-content/plugins/bookmarkify/facebook.png)
![[StumbleUpon]](http://hereinphoenix.com/wp-content/plugins/bookmarkify/stumbleupon.png)
![[Twitter]](http://hereinphoenix.com/wp-content/plugins/bookmarkify/twitter.png)
I am a Realtor in Gilbert, AZ, working with clients throughout the Phoenix Metro area. I am lucky to love what I do and appreciate the difference I can make in people's lives.
In a previous life, I was a rocket scientist - really! - but decided to step away from corporate America to be a Mom to my four boys. Found it hard to do bake sales, so I ran a small independent programming business instead.
Flash forward...I am now a single mom and I face many, many challenges everyday. I am living through the hardships that many are facing in this economy. These experiences have motivated me to help other people in my shoes.
I have teamed up with Dean Ouellette to form the East Valley Team - the best darn team in the Valley. Check out our site at http://www.EastValleyTeam.com. I spend way too much time on YouTube - check ou tmy channel at http://www.youtube.com/klavanway
