Nationally, about a third of closed sales this year have been foreclosures or short sales. In some Florida communities, the majority of closed sales have been of distressed properties. How has this affected market prices for “regular” homes?
It is clear that distress sales have adversely affected home values almost everywhere. Not only have their low prices generated “comps” for determining the value of other homes, but their neglected and abandoned conditions have been an eyesore in otherwise cared for neighborhoods.
Most of the home buyers we work with are looking for a nice, attractive, well maintained home. However, they are looking at the foreclosures and short sales at the same time. Realistically, their goal is to use the distress home prices as a negotiating tool for buying the home they really want for less than the home is worth.
Does this strategy work? To some extent, it usually does. They end up buying the home they really want at a bargain price which is only slightly higher than distress sale prices. They are willing to pay some premium in order to get the warranties with respect to condition, title, etc. that come with a “regular” transaction.
So, if you are a homeowner who needs or wants to sell in the next few years, now is the time to get in touch with the reality of the market. The market “is what it is”, without regard to your wishes or how much money and tender loving care you have put into your home. The current freeze on new foreclosures is only prolonging the agony of depressed home prices. Distress sales are going to be with us for a few more years, continuing to be a drag on home prices. As a result, the value of your home will probably not be soaring through the stratosphere anytime soon.