Selling in a Sea of Bank Owned Homes, Foreclosure Homes and Short Sale Homes

If your neighbors bank-owned home is for sale right next door, but the remaining homes in neighborhood for sale are equity sales, pricing is less of a factor. However, when a majority of sales and listings are bank owned homes, foreclosure homes or short sale homes, then pricing certainly becomes a much more important concern. The key is, like it or not you must compete with these distressed properties in order to to sell your home in this environment.

The current market value of your home in this scenario will be greatly impacted by these bank owed homes, foreclosure homes and short sale homes, especially when they represent the lions share of homes in the neighborhood.

Back just a few short years ago when the market was at a furious pace, appraisers simply did not have to seriously consider these distressed properties when appraising a home.  This is because prices were increasing at the time, and there were just fewer distressed homes for sale back then.  In our market  today, an appraiser must pay closer attention to the number of distressed sales as well as current listings of distressed homes So you may ask yourself, how do I compete?

Here some guidance with regards to pricing your Home that has equity in a market of bank owned homes, REO’s, Foreclosures and Short Sales.

Pricing a home correctly is vital to selling successfully, especially in these troubled times. You have to consider the market, recent sales, active listings as well as the direction of the market itself. Keep in mind that no matter what you believe your home is worth, the fact remains that a buyer is only willing to pay what they believe the market says it is worth at the given moment in time. In fact, even if you were offered more than the asking price of the home, if an appraiser is unable to appraise the home at the purchase price, than a buyer would simply be unable to buy the home at that price. The only way would be if were willing to come up with cash as close of escrow to make up the difference between actual appraisal and the offered price. I would not count on that!, What would you do.? Would you pay more than the home is worth?

Think about these questions when determining price:

Why would any buyer decide to purchase your home versus a bank owned home, foreclosure home, REO home, or a short sale home?

Would a lender be able to appraise your home for more than the bank owned homes, foreclosure homes or short sale homes in your area, and why?

What are the benefits to your home versus a distressed sale like bank owned homes, foreclosure homes, REO homes, or a short sale homes?

Here is the reality check, your home is not necessarily worth much more than bank owned, foreclosures, or short sales, even if you had s significant investment in upgrades to the home. Although all of us want to believe that these are worth 100% of what you may have paid for them, the bottom line is, an Appraiser will be unable to show much more than they are worth in the market as compared to other like properties. many upgrades in down markets may only be valued at 10% to 30% of what you paid, depending on the upgrade. Luxury items such as pools and spas are generally hardest hit in terms of appraised value.

Put yourself in a buyers shoes, and think about what you would do in this market. I would be willing to bet you would exactly how they do right now. They see the values dropping, opportunities galore, and unless your home is priced in the range they feel comfortable with, they will simply move on. They may buy a home that needs some work like carpeting, paint, touch up, small tile repairs etc., but once they see a bank owned home, foreclosures home or short sale home, then can see the benefit of spending far less to buy the home, and only spend a little to make the basic repairs or traditional upgrades. On the other side of the coin, if your home has equity, shows in move-in condition, and priced within a higher, but reasonable range of bank owned, foreclosures and short sales, buyers are more likely to decide to buy your home.

Think about it, if bank owned home, foreclosure home or short sale home is priced at $450,000 and likely needs $25,000 or more worth of repairs or improvements, as compared to your home that needs no repairs, a buyer may be willing to offer only $$475,000 to $500,000 for your home simply because they can move right in !

You should also carefully evaluate the local market of bank owned homes, foreclosure homes and short sale homes to see what the comparable sales are in the most recent 6 month period. Any further back than 6 months is typically not used on any appraisal so why even consider this in your comparison. Make sure you only consider homes within a range of no more than .5 miles (

You should also make sure that you stay within neighborhood lines, tracts and or actual dividers like major streets or highways. You do not want to compare sales from areas completely outside your immediate area.

A fair comparison of living square footage is another pricing issue. It is very important that your sales comparisons stay within a range no higher or lower than 10% from your home. Anything over 10% may begin to make unfair comparisons. Why would an appraiser compare a home of 2500 square feet to a home that is 3200 square feet?

Also make sure you consider age of comparable sales. If your home is built in 1975, and the comparable sales are built in 1995, that would be completely unfair to make the comparison.

At the end of the day, you should seriously consider all of the tips provided here, but you should consult with a local real estate professional to help guide you in the right direction. Believe it or not, think about pricing right at, or even slightly below the market place, this will almost always encourage multiple offers, which typically results in a selling price higher than the actual listed price. Results will certainly vary from place to pace, but this can be an effective selling strategy.

If you are still unsure about pricing your home or you would like to discuss selling your home with a Priority Real Estate professional agent, please call us at (949) 900-3800 for a FREE no obligation consultation.

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