What Makes A Good Offer On Distressed Property?
Let me get real direct with the central theme of this story: What constitutes a good offer on a distressed property?
Well, first of all, what is a distressed property? For the purposes of this blog, a distressed property is either a short sale or a bank foreclosure.
So, how much should you offer on such properties?
Fortunately, the Pinellas Board of Realtors (PRO) has a report every month called "Distressed Property Trends Monthly Market Activity Report". It's full of all kinds of charts and graphs that report on sales of short sales and foreclosures in this area, and that data holds the key to answering the question of how much to offer to make a successful offer on a distressed property.
One of the reports is called the "List Price to Sales Price Ratio". This is nothing more than a graph expressing the percentage of the asking price that properties sold for in that month. For example, if a house was listed at $100,000 and sold for $50,000, the ratio would be 50%.
In February of 2011, the sales price ratio for a short sale in this area was 92%, meaning that on average, short sales were selling for 92% of their asking price. In January, they were selling for 93% of asking price. Overall, the ratio for the past six to eight months or so has been hovering in the 91% to 93% range.
For foreclosure properties, the February ratio was 95%. In January it was 94%. Last October it was 100% and in June of 2010 it stood at 102%. Apparently foreclosures bring a higher percentage of asking price than do short sales, and I think buying them is a more competitive process than buying a short sale.
Just for the sake of comparison, non-distressed properties have been selling at a ratio of 91% to 93% for the past year or so.
So, if you're thinking about buying property in the distressed realm, it might be a good idea to keep these ratios in mind and use them as a guide when preparing your offer. The buyer who offers well below the asking price may occasionally get a property, but for the most part the bankers feel like they have already discounted these properties and want to get pretty close to their asking price. At least that's what the ratios seem to indicate.
Happy House Hunting!
-30-
Well, first of all, what is a distressed property? For the purposes of this blog, a distressed property is either a short sale or a bank foreclosure.
So, how much should you offer on such properties?
Fortunately, the Pinellas Board of Realtors (PRO) has a report every month called "Distressed Property Trends Monthly Market Activity Report". It's full of all kinds of charts and graphs that report on sales of short sales and foreclosures in this area, and that data holds the key to answering the question of how much to offer to make a successful offer on a distressed property.
One of the reports is called the "List Price to Sales Price Ratio". This is nothing more than a graph expressing the percentage of the asking price that properties sold for in that month. For example, if a house was listed at $100,000 and sold for $50,000, the ratio would be 50%.
In February of 2011, the sales price ratio for a short sale in this area was 92%, meaning that on average, short sales were selling for 92% of their asking price. In January, they were selling for 93% of asking price. Overall, the ratio for the past six to eight months or so has been hovering in the 91% to 93% range.
For foreclosure properties, the February ratio was 95%. In January it was 94%. Last October it was 100% and in June of 2010 it stood at 102%. Apparently foreclosures bring a higher percentage of asking price than do short sales, and I think buying them is a more competitive process than buying a short sale.
Just for the sake of comparison, non-distressed properties have been selling at a ratio of 91% to 93% for the past year or so.
So, if you're thinking about buying property in the distressed realm, it might be a good idea to keep these ratios in mind and use them as a guide when preparing your offer. The buyer who offers well below the asking price may occasionally get a property, but for the most part the bankers feel like they have already discounted these properties and want to get pretty close to their asking price. At least that's what the ratios seem to indicate.
Happy House Hunting!
-30-
posted by Terry Ward at 6:43 AM
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