Monday, September 19, 2011 / by Justin Hoffmann
RealtyTrac Inc. released figures on foreclosures, distressed, and bank-owned properties in August. These included homes (31 percent of the spring market) that were bought after a notice of default had been issued or were lender repossessed. The company reported that bank-owned homes which make up about 19 percent of all sales and are sold after being repossessed, sold for 40 percent less than the average price of other homes. That figure is slightly up from previous quarters including the same time period one year ago.
The figure drops for sales of homes in the foreclosure or short sale process. They sold for 21 percent less than the average home, according to RealtyTrac Inc. That figure is also up slightly from 17 percent in the first quarter.
The firm reports on its website that the average sales price of a foreclosure is $173,450 (at the time of writing). That price is just slightly down (1 percent) from the first quarter.
Where are most of the foreclosures these days? Head west to Nevada, Arizona, and California. These states' foreclosures accounted for 65 percent, 57 percent, and 51 percent, respectively, of all home sales. For Arizona, the percentage increased 16 percent from a year ago.
Other states such as Colorado, Florida, Oregon, Michigan, and Illinois had foreclosure sales that made up about one-third or more of their home sales in this year's first quarter."
"With average prices on distressed real estate trending down and average discounts trending up, this report is clearly good news for well-positioned buyers and investors looking for bargain real estate that will build them wealth in the long term and often cash flow as rental real estate in the short term," said James Saccacio chief executive officer of RealtyTrac Inc.
The firm also reports that 102,407 homes in default or scheduled for auctionpre-foreclosuresincreased 19 percent from the previous quarter. Many of these homes are sold via short sale, and despite this jump, the figure is still down 12 percent from the second quarter of last year.
The states with the most significant quarterly increase in pre-foreclosure home sales included: Nevada (43 percent increase), California (38 percent increase), and Texas (34 percent increase).
Nationwide, the pre-foreclosures had an average sale price of $192,129, which is 21 percent lower than the average sales price of non-foreclosure homes.
While foreclosures and distressed properties are selling for, in some cases, up to 40 percent less than the average price of non-foreclosures, it's important to understand exactly what you're getting. Some people think of this as a discount. But often that implies that you'll be getting the same or similar type of property as others on the market except for a lot less. However with foreclosures and distressed properties, what you're actually buying may also be significantly lower in price for a reason.
Many of these homes are sold "as is" and may need substantial work to get the home in livable condition. Of course, that's not always the case; there are foreclosures that might be in pretty good conditionjust do your homework before you buy.
Learn how much you'll need to put into the property to get it the way you want it or you may find that, even though you seem to be getting a bargain, you may have to put out more money than you originally thought. If you know from the start how much is needed then you can plan for it and come out ahead by purchasing a foreclosure/distressed property at a reduced market rate.
By Phoebe Chongchua