I have heard numerous people talking about Short Sales and Bank Owned homes, and how the sheer number of them are dramatically changing area prices by devaluing neighborhood prices based on the low prices they tend to sell at.
So I wanted to see for myself how Short Sales and REO’s are affecting the Eugene real estate market. What I specifically looked at was single family homes only that sold in the past 3 months, not condos or manufactured homes. It’s not that I don’t care for them, but I want to compare apples to apples.
Short Sale Genius Gives Insight On Short Sales -vs- REO’s -vs- Standard Home Sales
Before I get into the local statistics I want to point out that the video featuring Lee Honish and his short sale genius seminar and system helps confirm why the statistics that I find currently are where they are. As you will see below Short Sales are on average selling at lower price per square foot than Bank Owned Homes or standard sales.
Are Short Sales Right For You?
As a buyer if you need to move in a certain time frame or if you find that home that you get emotionally attached to, Short Sales are not the best avenue for you because they may close, but most likely not on your time frame. They can be difficult and emotionally draining. They are great for the investor that will not be heart broken if the home doesn’t close.
The statistics I used are pulled directly from RMLS, which is the Multiple Listing Service that all area REALTORS® use.
This first graph is all single family homes that sold in the past 3 months that are not Bank Owned REO’s or Short Sales.
For Those Of You That Like To See Actual Statistics, Here They Are.
NOTE: Click on the charts to view them full size.
Eugene Single Family Home Sales Statistics for Prior 3 Months
As you can see above, of the 202 home sales the average price per square foot sales price is $152.00
Eugene Short Sales Sold in the Prior 3 Months
Now as expected the average price per square foot sales price at $134.00 is about $18 per square foot less than a normal sale. What we see here is that if you want to go through the hassle of a Short Sale buyers have been saving about 12% off the sale price. Although that doesn’t take into consideration that many Short Sales don’t show as well or are in equal condition as an average home sale where the owner is trying to make the home show well. After all, in a Short Sale or Bank Owned home the seller is not making any money so they usually don’t go out of their way to make the home show well or even keep it in good maintained order.
Eugene Bank Owned, REO Sales for 3 Prior Months
These statistics are interesting on several levels. There have been more than twice as many Bank Owned home sales as Short Sales in the last 3 months in Eugene. This is not very surprising to me since once the Bank owns the home they want to dispose of them quickly. Where on the other hand when a home is in a Short Sale the banks are not nearly as responsive, although this seems to be changing somewhat.
Another intriguing statistic is that Bank Owned REO’s are selling for approximately 5% less than the average sale, yes only 5%. So many people believe they can purchase Bank Owned, foreclosed homes at drastic price reductions and in some areas of the country you may get even better prices.
When looking at these statistics you may wonder why Short Sales are only averaging 12% below market value and REO’s are roughly 5% below market… In my opinion it’s not so much that the Banks are not dealing, but more likely that buyers are only purchasing homes that are priced to sell. That would explain the small percentage of difference between the average sale price and home sales involving banks whether REO or Short Sale.
So sellers take note and price your home at a price that will actually bring an offer, rather than pricing it high and hoping for an offer. These graphs offer verifiable proof of what most agents advise their clients daily, but are seldom listened to. Of the 202 non-bank related home sales the average sales price was just 4% less than asking price.
Home buyers today are very savvy to the market and will seldom write an offer on an overpriced home.
{ 2 comments… read them below or add one }
Great comment EugeneRenter and I will do a second quarter analysis soon.
I can assure you that my statement is accurate based on RMLS statistics and yes, using average rather than median statistics. The 4% difference between list price and selling price was based on the current list price. It appears that the comparison you are making is between “original” list price and selling price which I believe could easily be the 15% you state.
Without taking into consideration the difference in statistical results which would be obtained between the median sales price and average sales price. The 15% number you give which appears to reflects the original list price tells me homeowners priced their home too high to begin with, usually against their agents advise and when the seller finally lowered the price to a point that they actually received an offer they ended up accepting an average of 4% less than that current list price.
Without getting too stuck on analyzing numbers, those are probably very close to real life numbers and why it is so important to price your home correctly to begin with. An overpriced home will generally not attract offers unless there is something very unique about the home. A point that many sellers have a very hard time grasping.
Your point of differentiating between average and median home sales prices are valid, but also very time consuming for me to gather data. You seem like a numbers person, maybe you would have an interest in writing articles here?
Thanks for the interesting analysis; it would be nice to see an update based on the 2009 second quarter MLS data.
I am not sure I would agree with the validity of this statement though: “Of the 202 non-bank related home sales the average sales price was just 4% less than asking price.”
Comparison of the average list price with the average sales prices would be skewed by outliers. It would make more sense to calculate the difference between the list price and sales price for each property, and then calculate the median percentage. Accoriding to PSU’s Center for Real Estate Quarterly, the median sale price in Eugene in Q1 of 2009 was 85% of the original sale price (see http://www.pdx.edu/sites/www.pdx.edu.realestate/files/media_assets/CREQ-2ndQtr2009.pdf ). I suppose the difference between PSU’s 15% and your 4% could be due to using different time periods, different geographic area (I assume theirs is for the Eugene MSA, not the City of Eugene), and the fact that MLS list price may not be reflective of the original list price due to price reductions by the seller.