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I know Those Homes Sold For That Much...But They Were Foreclosures and My Home Isn't

Foreclosures in Columbia, SC So you've decided to sell your house and you are well aware of the fact that homes for sale in your community have involved foreclosed properties. All those homes that sold in the past 6 months were bank owned and they weren't sold by an individual, but instead, they were sold by those evil banks that got us into this mess in the first place. Not only did the Cretans foreclose on the homes and kick out homeowners, but now they step in and undercut the prices of other sellers and steal their buyers. But we don't have to price our house the way the bank does, because ours is not a foreclosure, so we really don't have to worry about because ours is worth more.

Welcome to the Truth

Well welcome to the harsh reality of what I like to refer to as the truth. It's not always a fun thing, but you have to face it if you want to be successful in today's market. All those foreclosed properties in your community do affect your home. They do lower the market value in a lot of cases, because the banks do lower their prices to aggressively market their properties. As a result, the market value of comparable properties like yours does change.

I know that's not at all what you wanted to hear. In fact I didn't really want to say it, but it needed to be said. You can't ignore the facts.

Forclosures in Columbia, SC The facts are unfortunately something that we all have to face and foreclosures and bank owned properties are a fact of life today. They are your competition and you do have to price your house for sale in accordance with the current market value for your community.

Another horrible fact to face is that pricing is one of the most important things to focus on when selling a house. Having a house that's in great condition is also extremely important, but if you find yourself overpriced by ten or twenty thousand dollars, you don't stand a chance of moving anytime soon. So while you may be able to get a little more for your house due to it's better condition, you may want to lose the theory that your house isn'tt affected by foreclosures. Unfortunately, we all are, and we just have to accept it and move on.

www.JLBoney.com

______________________________________________________________________________________________________

JL Boney, III - Columbia, SC Realtor - Russell and Jeffcoat Realtors

I specialize in Columbia, SC real estate and the surrounding areas, including Blythewood, SC, Kershaw County, Fairfield County, and Lexington, SC. If you are in the market to buy or sell a home in Columbia, SC or any of the surrounding areas, I would love the opportunity to speak with to see how I can help. Thanks for reading and feel free to contact me if I can be of service to you.

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Posted by JL Boney, III Columbia, SC Real Estate on 09/10/2009 03:01 PM

Comments (60)

Foreclosures in the Home Selling Channel

foreclosures in columbia sc, selling a house in columbia sc, columbia sc real estate

Originally posted at: JL's Columbia SC Real Estate Blog: I know Those Homes Sold For That Much...But They Were Foreclosures and My Home Isn't

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60 Comments on I know Those Homes Sold For That Much...But They Were Foreclosures and My Home Isn't

SEP

2009

Jl - The truth is that "cashing in" on big profits from the sale of a home is the ghost of Christmas past. Sell if you have to ...but the truth is that you may not like what the market bears. Sobering post for many sellers

JL, those foreclosures also make it very difficult to do a proper CMA. We can cherry pick the listings to keep the foreclosures out, but the analysis must also carry the information that an appraisal for a bank may not be so charitable and would include the foreclosures that are closest to their home, and accordingly the analysis will come out much lower.

Hey JL - Truth is truth and it has to be said. Naturally sellers don't want to hear this but the good agents deal with it up front. Excellent post and a re-blog for sure!

JL, Ya, ouch. Foreclosures hurt everyone's property values, and it is tough when you try to sell. Along with that, I was talking with an appraiser friend the other day, and to no great surprise, the same holds true on re-finance. Comps are comps, and the lenders don't care how it got on the market, just what the market will pay for it....oh my

JL, I would just like to say the truth sucks. The market is and always will be what the market is. An abundance of foreclosures sinks all the normal properties around them.

JL --- you are so right --- the truth hurts --- this is a well written post and one that needed to be written. I agree with Anna -- it is a must re-blog. Thanks.

Mama Liz

Wow! If only I had a penny everytime that was brough up with the sellers here in Wyoming. Great post!

I wish I could say you were wrong, JL...but you aren't. But, I do see a small premium on homes that are not in foreclosure. The main reason, is that the buyers can be reasonable sure that the deal will be closed in a timely matter.

When I do a comp I just toss out the short sales (the few that get into the mix). They pull everything down AND they are usually pretty trashed and DO NOT compare to the fresh, "normal" listsings.

JL, if I had to move in these times and was relocating to a similar housing market that would certainly take the price sting out for me. It's a harsh reality to see those numbers on paper when selling but reminding myself of the deal I would be getting on the other end is something that is not taken into consideration by many. I understand this isn't everyone's situation.

And if the home isn't priced competitively well you'll be losing out to the listing down the street which is priced right.

Very good point sir. We were talking just yesterday and there are lenders that are saying we are in for another round of foreclosures as more ARM's are fixing to adjust again.

JL - Nice job addressing the elephant. Too many people want to walk around the room and pretend he isn't there. But it doesn't take long before the pile starts to grow. If sellers don't figure out how to handle the situation properly, they'll quickly be in over their heads.

SEP

2009

JL great post! Now if only all REALTORS would share this truth homes would be selling quickly and inventory would shrink!

A harsh reality that many home owners find dificult to swalllow, but will have to accept if they wish to sell their home in this market.

Amen JL! Well said. I will forward this to my neighbor who thinks her home is better than all the other 5 foreclosures in our neighborhood! Show her she can't get $30k more than other homes just because SHE IS NOT A FORECLOSURE! It's all about numbers!

Thanks for sharing!

JL...

It is a harsh reality ... and congrats on making the newsletter. This is a great post!

JL: What an excellent post. Very well presented... and in a simple enough manner that even a SELLER can understand it... LOL. Thanks... I'm going to "borrow" your ideas here... if I may... and used them to help my sellers with their pricing. Great job !

You're spot on JL. Sellers do have their blinders on in particular in areas where there are multiple foreclosures and short sales. All sellers think their home "is differnet" and immune to the market realities. In this case, I don't quite understand cherry-picking closed sales for the CMA. What good does that do if the lower priced homes are on the market? In the end, it's what the buyer is willing to pay for a given property and if they are close to the same property/product then the lower price will get the sale.

However, in an area with one foreclosed sale and a number of non-foreclosured sales there is a good argument to throw out the foreclosure or at least temper its effect on the numbers. If there are now no more foreclosed properties in the area, the market has changed...for the better!

One thing that I go into when I am talking to sellers... is that we do not determine what their home will sell for, but neither do the market of available home buyers. The ones who have the final "say" in determining what a home sells for... in all cases except for the rare "cash sale"... are the appraisers. They will not assign value to a home above that which the neighborhood comps show is warranted.

Great post and very timely.

Good post JL

Who the seller is does not matter at all. So many agents "blame" foreclosures for the market fall. The market determines what a property sells for - not who the seller is. If it is priced too low, it will sell for over asking price. Stop blaming the banks for 100% of this - this was fannie and freddie at their finest. The govt forced banks to lend to people who could not pay it back.

That behaviour became acceptable, then it became the norm. Still goes on to this day in some areas.

How fannie and freddie are allowed to donate to politicians is beyond me. Where is the outrage?

How right you are! I tell my clients that you either "Price to Sit or Price to Sell".

The truth is that foreclosures...are the market.

The truth has long been that home ownership has never really been much of an investment.

The average home we live in does not produce any kind of cash flow. Sure there are some tax advantages, but that is part of the lure. When real investors left the market, prices plummeted. The market will rebound when they come back in aggressively.

Watch what happens when the market rents produce a positive cash flow based on investment price.

Home ownership is a great thing, but don't consider it as your investment strategy.

But my house is still worth more... what can you do about making my value higher... ;-) Its best to give the truth as opposed to what some other agents may do.. list it too high and ultimately lower it over and over until the price is finally where it should have been to begin with. Except now its been on the marketing for 8 months.

JL - I have to reblog this post for my area. I have so many sellers that just don't seem to understand that foreclosures are NOW the comps. It is unfortunate but as you said.....it's the TRUTH! Thanks for this!

It needed to be said, now if only people would hear what you are saying. This foreclosure mess is like a firestorm that creates it;s own weather.

Hi JL,

This is a great post. Unfortunately sellers often do not understand why their property would not be worth more. They have paid their bills on time and look how beautiful it is! They don't realize without any other homes sold at a higher price, they have nothing to compare their home to! It is up to us to help them understand the process of how sales affect value. Not an easy thing to do. Especially to someone that does not want to hear it!

As Hank said above, Price to Sit or Price to Sell!

JL you do speak the truth, thank you. As an appraiser we go up against this all the time. We don't make the market, we just report it. Why don't you agents "use" us appraisers to your benefit. You may know the home is not worth what the homeowner wants to price it at but you can recommend the homeowner get an appraisal by a qualified appraiser who knows the market. You be the good cop and we will be the bad cop. Recommend they price the home using the appraisal. This will make their home more competitive with whats happening in the market right now as we look at the most recent sales as well as the most recent listings. This way the homeowner will not blame you for the price that is arrived at, rather you can remind them this is the market value that was arrived at by the appraiser which is based on the cold hard facts.

Great post! I am also an appraiser and I am often asked "will you use those short sales and foreclosure as "comps"?" My answer is....yes....if they represent the typical market!

In some cases - when there are only 2 foreclosures in the last 6 months, then maybe no. They don't effect your home. But if 1 in 6 homes selling (or listed) are foreclosures...what is a buyer looking for in the neighborhood? Not a retail listing!

So truth is truth - it just has to be objective truth. Appraisers need to survey the WHOLE market (actives, pendings and closed sales) and draw distinctions between retail and "REO" sales - in order to verify that REO comps are appropriate.

It is all in the mind of the buyer though, isn't it? It isn't what the SELLER wants to think (positive thinking just doesn't cut it here!) - rather it is what the buyers in your market are thinking...that is where the market action is!

Good post JL!

JL great post. The market is the market, and unfortunately we are now all effected.

All good points and sellers do have to realize their home is just a house like any other house that is on the market. Most people will just not over pay in this market.

JL, you would be surprised how many clients don't want to take the Realtors advice on pricing. As their loan officer, I tell them that the market (and appraisals for that matter) is driven by the "principal of substitution." If I can buy the exact same home as yours for $50,000 less, I don't care if you have gold faucets, diamond chandeliers, and poured your heart and hard work into that flagstone patio--it's $50,000! That seems to drive the point home.

If the potential buyers have a forclosure as a choice, they will take the house that best suits their needs AFTER they have considered the price. If the foreclosed house is thousands cheaper (although dirty) - THEY WILL BUY IT FIRST! Foreclosures are definitely comps!

I'm trying to digest the story. I own a handyman business so I'm trying to sort out in my mind, what I would recommend to a customer. During the early fear days, people simply stopped making repairs ... and most never realize that many repair costs increase the longer you let a problem fester.

Repair costs are hidden in foreclosures. Appraisals don't reflect this story well either, i.e. it's more about neighborhood, size, # bedrooms, # bathrooms, etc. The repair costs between a well maintained home and a foreclosure on the same street, all appraisal factors being equal EXCEPT condition could be significant. Say a foreclosure sells for $250,000 but needs another $50,000 to get it back to good condition. The other owner has been paying that all along but maybe can only get $10,000 extra for "no aggravation".

What does the owner with a house in good condition do? It will be interesting to see the next 2009 Remodeling Cost vs Value report, i.e. do we take last years data & cut value in half? You still pay $12,000 to upgrade your bath but instead of the $8,000 you would have gotten back previously, now you should only expect $4,000?

I have an interesting conundrum for you. Here in Texas the tax assessors will not look at the foreclosures in a neighborhood when assessing a homes value. So we have the interesting situation where home sales values are dropping while tax assessments are rising. Explain that one!

Just a quick comparison, foreclosure versus non-foreclosure, since you mentioned a $10,000 difference.

$1500 - replace all the appliances that the former owner took with them

$1500 - ditto for the light fixtures

$5000 - replace the carpets and flooring trashed by former owners

$3000 - resod front yard that deterioated to weeds

$5000 - replace HVAC system stripped off home

$4500 - repaint entire interior of home (but the new homeowners may be able to do this themselves for about $400-500 in supplies)

$1200 - pay "back fees" for HOA not paid by former owner

Point is, there's always more to consider than just the total cost. In some cases, that $10,000 higher price for a non-foreclosure is well worth it.

Absolute truth. I would rather set my seller's expectations with honesty than have to continually try to lower the price of my listing. It is better to walk away from a listing if you cannot comparably price and sell the non-distressed home.

However, as a listing agent we must go through the comparable foreclosure/distressed listings in order to determine how much value has been removed from that home. If my seller has a beautiful and maintained home then that will certainly add more value to the sales price than a distressed property that is in bad condition or disrepair. Certainly, I would price my listing at a higher price point.

Every listing is a case study!

Penny, your breakdown is excellent and should be brought to the forefront when a buyer is considering a foreclosure property vs. a retail property. So many buyers just want the "deal" and think they got it until they find out how much money it takes to get the property back into good shape. Then they realize maybe it was not such a good deal on then its too late.

We are all affected and it's just killin' some of our neighborhoods. Appraisers are so tight these days they aren't giving any breaks when it comes to the last few sales being foreclosures. It's so frustrating!

We have to deliver this message every day to our sellers. They don't want to believe it, but eventually they have to face the truth.

Ahhh the Truth...so rare in pricing presentations. As I said in an earlier blog, it is often not a pricing problem, but a motivation problem. A doctor shows you and X-ray of your lung that has been destroyed from smoking. Everyone agrees it's the truth. But they're still addicted to cigarettes and don't have the motivation to stop.

But if it IS a pricing problem, use this method. Instead of referring to comps as comparables, use "competing" options. Look at a Road & Track or AutoWeek magazine review on a new car. They will review the car, then show "comps". The comps are "other vehicles that purchasers considered." For example, a review on a Porsche 911 will list as competing options, the Corvette, Audi S4 or the Nisson 370Z. They may not be comparable, but they are Competing Options.

Finally, value is determined by the physical properties (Location, Size & Condition), not the legal properties (Title, short sale, foreclosure, etc.).

David Knox

Great post JL, reblogged it.

Robin Turner Sellers have to understand that, foreclosure or not, the prices will affect the appraisals and ultimately that will lower the price to whatever the appraisal comes in at. Since most appraisers use basically the same software to generate the appraisal the banks are setting the prices, not the market. It's sad to see houses sit for months and months, finally get a contract, then the bank's appraisal lowers the price by $30,000.

Every deal I have done this year, except for a couple of cash deals, has been affected by this

This one was totally re-blogworthy and I did too. :)

JL, this is a terrible reality that many sellers are finding out as we speak

SEP

2009

Great post JL. I plan to reBlog it. Have a great weekend.

Great post.

It is amazing how many people out there, including people in the industry, just simply do not have the most basic understanding of market forces and how supply and demand dictate price.

Many in the industry honestly believe the route to economic recovery is for everybody in the industry just talk up the industry and the market.

Recovery is not going to occur until the market finds its bottom, and all of these efforts by government and the industry to artificially sustain price levels that are not aligned with consumer demand are only making matters worse.

If you are not part of the solution, then you are part of the problem.

Claude- Unfortunately, at least for now, that's very true.

Ed- In the end we will have to deal with them in one way or another.

Anna- It's better to get it over with right from the start.

Dean- You can't ignore what's starring you in the face.

Gary- The truth does suck in this case, but we have to be aware of it.

Liz- Thanks Liz, it's a hard truth that needs to be said.

Christine- I'm sure you could cash in a few.

Bill- I wish I was wrong as well my friend.

Carla- We don't have many short sells here to contend with.

Cynthia- Relocating is always something of a scary thing to do, these days it can be really tough. But in the end we have to be realistic.

Don- I have heard a lot of talk about that as well.

Erik- You can walk around him, but that doesn't mean he's not there.

Laura- I believe it would make a difference as well.

Sheryl- Yes they will.

Johanna- I think she will be waiting a while for her's to sell unfortunately.

Richard- It is indeed and thank you my friend.

Karen- I like being simple and to the point.

Barrie- Thanks!

Bob- You can skew the numbers all you want, but that won't make the buyers like a non forclosure any better when it's over priced.

Karen- Buyers determine market value, always have.

Phil- In the end, there is plenty of blame to go around.

Hank- That's a good way to put it.

David- They'll be back, they always come back.

John- That's never been a good plan. Price it right from the start if you can.

Leesa- It is what it is, we have to accept it.

Gene- It will still be ignored by many I'm sure.

Stephanie- It is a sad thing for those that did everything right, but we are all affected in the end.

Tom- Appraisers can't ignore the truth any more than the rest of us can.

Richard- Our appraisers have to use them as well.

Dean- Yes we are.

Jirius- No they won't.

Kendall- Unfortunately I wouldn't be.

Teresa- Yes they are.

Tina- There are many hidden costs in certain foreclosures, that's for sure. I have written about that as well.

Mark- Sounds like local Government at it's best to me.

Penny- I did mention a $10,000 dollar difference just as a quick reference point. As for all the costs adding up, I have written about that as well and why foreclosures are not always a good deal.

Nancy- Constantly dropping the price doesn't help as much as getting it right from the start.

Mary- It surly is.

Roberta- If they want to sell that is.

David- I guess now is a bad time to say that I am a smoker. Other than that, I like the idea big guy.

Lyn- Thanks!

Robin- Yes they will.

Candice- Thank you.

Mark- Yes they are.

Paddy- Thanks!

Eric- There are many who do not understand, but they better start.

JL,

The truth hurts! The faster our sellers "hear" the faster we can sell their home!

SEP

2009

The truth hurts sometimes! But there it is. Thanks!

I have been busy with the summer selling season and have been reading but not commenting. This post deserved a minute of my time...it is great and all sellers should be required to to read it!

Reality is a .....

SEP

2009

Bill- That's true too.

Judi- Yes it does, and yes it is.

Sonya- I think it might clue them in to some sad facts.

B&B- Yes it is, say no more.

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JL Boney, III Columbia, SC Real Estate

Columbia, SC

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Russell and Jeffcoat

Address: 7601 Two Notch Rd., Columbia, SC, 29223

Office Phone: (803) 788-1450

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