Though it's usually not true, there's a belief that short sale and foreclosure properties (REO's) sell for a big discount off the list price.
Let's have a look.
In the last three months just 4 REO's in the Tucson Foothills have sold through the MLS. Here's what they were listed/sold for;
-4255 N Camino Arco Tucson,85718- $234,900/$237,000
-5000 E Calle De Las Chacras Tucson,85718- $389,000/$375,900
-2050 E Cerrada Nopal Tucson,85718- $445,000/$455,000
-5601 E Rio Verde Vista Dr Tucson,85750- $650,000/$575,000
And there were 5 short sales. Here's the listed/sold prices;
-5535 N Calle La Cima Tucson,85718- $260,000/$245,000
-640 E Deone Ln Tucson,85704- $329,000/$330,000
-6641 N Mesa View Dr Tucson,85718- $499,000/$500,000
-4540 N Flecha Dr Tucson,85718- $550,000/$550,000
-5535 N Calle La Cima Tucson,85718- $785,000/$783,500
The REO's sold for an average of 95.6% of list price, while the short sales sold for a whopping 99.4% of list price.
And normal, or non-distressed sales during the same period sold for 93.5% of list price.
Why is that, why are short sales and foreclosures, contrary to popular belief, selling closer to list price than normal non-distressed sales.
Because in both cases, short sales and foreclosures, there is a very motivated seller. In a short sale the owner is trying get the property sold, and the lender to agree to take less than is owed them, before the property enters foreclosure. Meanwhile the lender is also motivated to take less than is owed them, because the cost of executing a foreclosure, and the costs of then owning, maintaining and selling the property are very high, and the outcome unknown.
So a bird in the hand ...
In a REO the lender already owns the property, and has had multiple BPO's done by different agents. BPO = broker price opinion, an opinion of value for the property given by various agents. So the lender has a very good idea of what the property is really worth as a foreclosure sale, and they have no emotional attachment to it, and everyday they own it, it costs them more money. So they want to get rid of it as fast as possible, and to do that they price it to sell. And unlike your average home seller, who's usually looking to maximize their profit, the lenders at this point are just looking to cut their losses. And the less time they spend with a property, the less it costs them.
And because buyers are attracted to attractively priced short sales and foreclosures, they get more attention, more bids, and end up selling at higher sale price to list price ratios.
But; It's not a perfect system, so not every short sale and REO property is a screamin' deal or priced where it should be. You've got to evaluate each and every one that interests you.
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