Anatomy of a Foreclosure in Today's Real Estate Market

 

 

 

Today I saw another great new bank owned foreclosure listing hit the market at $424,900 and I thought it would make great fodder to take a look at the anatomy of a REO listing and what an asset a good Realtor® is to a buyer.

 

Typically, before a foreclosure hits the market there is a long series of events that brought us to this point. In this case the home was last purchased on July 23, 2003 for $437,000 and was last marketed as a short sale a little late in the foreclosure game. It was listed on December 3, 2010 for $469,000 and was cancelled about two weeks later probably because the foreclosure auction was held on December 14, 2010.

 

The plaintiff in that case had a final judgement in the amount of $690,982.14 and had announced prior to the auction that their maximum bid would be $470,000 and that alone was enough to scare off any potential 3rd party bidders. As of today the previous owners name is still on the deed. Once the bank has taken back the property they firm up a market value either through a broker’s price opinion (BPO) or appraisal. Usually, they will want to price the property at a number the market will react to within 30 days as at this point they want the property sold.

 

Valuations from a Realtor® or certified appraiser can be all over the board but the bank will usually hold this valuation in high regard as well as the input from the listing agent. One thing I always find interesting is to go back and look at the city wide median price at the time it last sold compared to where that median price is today. On July 1st of 2003 the median price of single family home in Jupiter over the previous 6 month period sat at $294,250 and on January 1st of this year that number was at $300,000 or about 102% of the earlier number. If we look only at the price this home last sold for and evaluated it’s current value based on the change to the median price of the overall market we would say the home’s value would be about $445,740.

 

Of course, what one really does when evaluating the current value of the property is to compare it to the most recent sales of similar properties in the neighborhood and make adjustments for differences between the properties. In this neighborhood the market is very strong with 9 active listings and 5 sales closed over the past 90 days which gives us a limited inventory of less than 6 months supply; truly a balanced market. 

 

This particular home is one of the larger floor plans available with 5 bedrooms and 4 baths and a total of 3,258 square feet under air. The county has placed a valuation on the home of $378,756 for property tax purposes and I must point out that this value is not the same as market value and should not be construed as such. Looking back 6 months there have been a total of 5 sales in the neighborhood of larger floor plans and those sales were at the following values;

 

A short sale of a property having 2,932 SF (sales price was $136/sf) and a county valuation of $336,958 (sales price of 119% of county value). This home appears to be in similar condition and finishes to the subject property.

 

A normal sale of a property having 2,932 SF (sales price was $153/sf) and a county valuation of $353,096 (sales price of 127% of county value). This home has a private pool and appears to be in superior condition and finishes to the subject property.

 

A normal sale of a property having 3,258 SF (sales price was $153/sf) and a county valuation of $402,310 (sales price of 124% of county value). This home has a private pool and appears to be in little better condition and similar finishes to the subject property.

 

A normal sale of a property having 3,561 SF (sales price was $158/sf) and a county valuation of $407,607 (sales price of 138% of county value). This home appears to be in superior condition and finishes to the subject property.

 

A normal sale of a property having 3,561 SF (sales price was $160/sf) and a county valuation of $423,332 (sales price of 135% of county value). This home has a private pool and appears to be in superior condition and finishes to the subject property.

 

This new listing is really in average condition but structurally sound with need for good cleaning and interior paint along with a few other minor items that require attention. Normal sales of the most similar properties have most recently sold between $153 and $160 per square foot and between 124% and 138% of county valuation. The lone short sale sold at considerable lower numbers at $136 per square foot and 119% of county value.

 

Now we have this bank owned property and your buyer wants to know what it is really worth. The answer is it is worth what a ready willing and able buyer will pay as long as the property will appraise at that value and based on the list price and recent sales it should not be a problem. But if you want to compare it to the most recent normal sales it would be worth between $498,474 and $521,280 on a direct square foot comparison and between $469,654 and $522,683 on a direct county valuation comparison. With a list price lower than any of these numbers by between $44,754 and $97,783 it will certainly attract some attention.

 

When compared with the lone short sale the home has a relative value of $443,088 on a square footage comparison and $450,720 on a county valuation comparison. The list price of $424,900 still looks very enticing but will the market react and how quickly. My bet is the market will react and it will do so very quickly; sure the house can use a little spruce up bit is a great example of why the right bank owned foreclosure can be a buyer’s very best friend in today’s world.

 

If you would like any additional information on this particular home or any others in Palm Beach or Martin Counties please feel free to contact me at your convenience.

 

 

 

Always at Your Service,

 

 

 

Tom Priester  e-PRO
“Results Driven Real Estate”

 

Keller Williams Realty

561 308-0175

tom@tompriester.com