Average REO sales price/Town
$-57,782 Cleveland
$111,260 Charlotte, N.C.
$124,555 Las Vegas
$149,094 Phoenix
$283,825 Santa Barbara, Calif.
Despite rising home prices in many markets, buyers can still find plenty
of deals in foreclosures and other distressed properties.
In contrast, with distressed properties, buyers still can save hundreds
of thousands of dollars. Working in their favor, in part, is that banks
are more willing to unload homes as short sales than in previous years.
Some banks are offering homeowners who are behind on mortgage payments
cash in exchange for selling the home in a short sale. (Bank of America,
for instance, has been offering as much as $30,000 to qualifying
homeowners since last year.) That’s led to more short sales selling at a
discount. And after years of a growing backlog of foreclosures, more of
these listings are hitting the market, says Daren Blomquist, vice
president with RealtyTrac, as courts process more of these cases. (Many
states require court approval before a home can be repossessed by a
bank.)
Experts warn that purchasing a distressed property is not typically an
easy process. Buyers could end up waiting four months or longer to find
out from a bank whether their offer on a short sale has been approved.
And real-estate agents say bidding wars have intensified, with purchase
prices of distressed homes often surpassing asking prices. In Charlotte,
N.C., for instance, purchases of bank-owned properties (those that the
banks have repossessed) increased 109% in the fourth quarter of 2012
from a year prior, according to RealtyTrac. Mike Hege, a real-estate
agent with Pridemore Properties in Charlotte, says these homes often
receive offers from 20 different buyers. Buyers should also consider the
condition these properties are in and how much cash they’ll have to
spend for repairs.
Even with such price pressures, buyers can find big discounts on distressed homes in several markets.
Here are five cities where homes are still cheap.
Cleveland
- Average REO sales price: $57,782
- Average discount vs. nondistressed sales: 56%
Cheap prices have helped give a boost to home sales in Cleveland. Buyers
looking for rock-bottom prices turned to bank-owned properties — also
known as real-estate owned or REO properties, homes that lenders
repossessed after foreclosure — which were selling for less than $60,000
on average during the end of 2012, a 56% discount off regular listings
in the city. During the fourth quarter of 2012, there was a 141%
increase in buyers purchasing these properties from a year ago — the
largest purchase spike for REOs nationwide, according to RealtyTrac.
Experts say deals are unlikely to go away soon. Home sales have been
dropping since mid-2012, according to data from Trulia.com. And many
existing homeowners are facing foreclosure. One in 10 homeowners in the
Cleveland metro area was 90 days past due or in foreclosure in the
fourth quarter, according to the Mortgage Bankers Association.
Of course, while real estate is cheap, buying property in Cleveland
isn’t without risk. While the city’s unemployment rate is lower than the
national average, job losses have contributed to home price declines.
Charlotte, N.C.
- Average REO sales price: $111,260
- Average discount vs. nondistressed sales: 43%
Sales of bank-owned properties shot up 109% in the fourth quarter of
2012, according to RealtyTrac. Real-estate agents say investors and
individual buyers who want to occupy the homes are behind the sales.
Hege, of Pridemore Properties, who specializes in REOs and short sales,
says he sold roughly 20 bank-owned homes last year, about double the
number in 2011.
Cheap pricing is creating an opportunity for buyers who are relocating
from pricier markets, like New York and Boston, he says. After selling
their homes, these buyers often have enough cash to buy a home outright
in Charlotte, he says.
The state is also home to several other markets with big spikes in REO
purchases, including Winston-Salem and Greensboro. According to
RealtyTrac, those homes sold at an average discount of 49% and 40%,
respectively, compared with regular listings during the fourth quarter.
Las Vegas
- Average short-sale price: $124,555
- Average discount vs. nondistressed sales: 33.4%
Despite being ground zero for the housing bust, there are a lot more
short-sale listings to come to Las Vegas, says Paul Rowe, director of
short sales at Shelter Realty, a real-estate brokerage based in
Henderson, Nev. Nearly 8,000 homeowners in Vegas are currently in
default on their mortgages, according to RealtyTrac — and their
properties could turn into short sales or foreclosures. “[Short sales]
aren’t going anywhere for another two to three years,” Rowe says.
That could give more options to buyers looking for a deal. There are
roughly 16,600 listings in Las Vegas, down 24% from a year ago,
according to the Department of Numbers, which tracks real-estate data.
While that’s pushed up prices roughly 17% over the past year, prices
could reverse course if there’s an influx of short-sale listings.
Phoenix
- Average short-sale price: $149,094
- Average discount vs. nondistressed sales: 37.84%
Buyers have been rushing into Phoenix in search of big deals. Short-sale
purchases increased 43% during the fourth quarter of 2012 compared with
a year prior, according to RealtyTrac. It’s not just investors who are
behind the trend. Owner occupants are also competing for these
properties. Given the competition, experts say, buyers looking to pick
up a short sale will have a better shot if they come to the table with
an all-cash offer.
But real-estate agents warn that the window of opportunity to snatch up
distressed properties at real discounts is closing. Short-sale inventory
is falling: There are currently 3,700 short-sale listings in Phoenix,
down 56% from a year ago and down 76% from two years prior, says Brian
North, cofounder of Green Street Realty, a boutique brokerage in Phoenix
that specializes in short sales.
And buyers are more likely to encounter bidding wars, which will likely
drive the purchase price up, he says. They should consider how much work
the property will need in repairs to make sure that the short sale will
be cheaper than buying a regular listing.
Santa Barbara, Calif.
- Average short-sale price: $283,825
- Average discount vs. nondistressed sales: 42.69%
Santa Barbara experienced the biggest increase in short-sale purchases,
which rose 107% during the fourth quarter from a year prior, nationwide,
according to RealtyTrac. Real-estate agents say buyers returned to the
market late last year in search of deals as home prices appeared to
bottom out: the median sales price of all properties in the city was
roughly $600,000 at the end of 2012, down from about $700,000 in 2010
and approximately $800,000 in 2008, according to listings site Trulia.
Many of these buyers encountered limited inventory, so they broadened
their search to short sales, says Rick Hannay, owner broker of Avalar
Real Estate of Santa Barbara. In total, there were just 436 listings in
Santa Barbara in December, down 20% from a month prior and down 31% from
a year prior, according to Sotheby’s International Realty.
Buying short sales also came with another perk: bigger discounts. Short
sales in this market sold at a 43% average discount compared with
regular listings, according to RealtyTrac. The discounts could have been
bigger were it not for bidding wars, says Hannay. It’s common for short
sales to receive up to a dozen offers within their first few days on
the market, he adds, which results in a purchase price that’s higher
than the listing offer.
http://www.marketwatch.com/story/5-cities-where-houses-are-cheap-2013-03-08
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