Are Distressed Properties in South Orange County REALLY a good deal?

Are Distressed Properties in South Orange County REALLY a good deal? It depends who you ask.

I will start off playing the devil’s advocate and say “NO, distressed properties in South Orange County are NOT a good deal”. The market is merely made up of supply and demand and since there is a high demand by buyers that want distressed properties because there is the perception of a better value, this higher demand will drive up prices of distressed properties and lead to those distressed properties simply selling at market value.” This perspective makes sense since I know many, MANY buyers that ONLY want to look at short sales and foreclosures in South Orange County.

However, unfortunately, that logic does not hold true. In reality, I would argue that there is a definite equity premium in the market today. In fact, according to Realtytrac, an Irvine based company, “…the average California distressed property sold at a 38 percent discount in the first quarter — the nation’s fourth-largest gap between value and sale price for foreclosures or short sales.”

So, interestingly enough, distressed properties in South Orange County that are dirty, uncared for, vacant, and that smell like cat pee are indeed selling at a discount that is notable and in most cases, this suggests a better value than a corresponding equity property.