Home Seller Tips: How To Compete With Foreclosures and Short Sales

Real Estate Agent with RE/MAX Gold, 916-218-7481 License #01351451

Selling a home in today's real estate market can be an eye-opening experience for many sellers.  Many acknowledge the changing real estate landscape, but since their home is clearly the "best one in the neighborhood", short sales and foreclosure sales are often dismissed as irrelevant.  This perception is particularly true in areas where short sales and foreclosures represent a high ratio of overall home sales.

In order to effectively compete with this trend, it's critical to understand how these types of transactions impact local real estate markets.  Zillow.com recently published the results of their research into the percentage of foreclosure home sales and the associated "foreclosure discount" in different real estate markets across the country.  This research and the data summarized below illustrate the point that foreclosure home sales really do create two separate markets and that home buyers tend to demand a discount over and above the physical damage often seen in these homes.  All data was from the 3rd quarter of 2009:

Metro Area                 Foreclosure Discount        Foreclosure Sales %


Pittsburgh, PA                                   59%                       10%

Cincinnati, OH                                   39%                       15%

Columbus, OH                                  38%                       19%

Minneapolis-St. Paul, MN                     34%                       26%

Phoenix, AZ                                       29%                       58%

Denver, CO                                        27%                       25%

Los Angeles, CA                                27%                       39%

Kansas City, MO                               25%                       29%

Riverside, CA                                     25%                       66%

San Diego, CA                                    24%                       39%

San Francisco, CA                             24%                       39%

Las Vegas, NV                                    23%                       74%

Washington, D.C.                             21%                       21%

Sacramento, CA                                19%                       50%

Seattle, WA                                        19%                       17%

Portland, OR                                      18%                       18%

Source:  Zillow.com & Bloomberg.com

Based on the results of their survey Zillow.com reports an average "foreclosure discount" of about 19% in the Sacramento real estate market, which is an important factor for other home sellers to consider.  We can't do much to change the fact that these types of real estate transactions are influencing many real estate markets across the country; what we can do is acknowledge the problem and figure out how to successfully market and sell homes in this environment.  Here are a few tips for home sellers who want to successfully compete against foreclosures and short sales:

•·         First and foremost, price your home competitively.  This does not necessarily mean that the foreclosure sale down the street is the best comp for your home, but it has to be considered.

•·         Present your home in prime condition.  Foreclosures and short sales tend to be in comparatively rough shape; people losing their homes often neglect routine maintenance for quite a while before they actually lose the home.  Your home has to clearly out-shine the competition in this area.  Doing so will go a long way to overcoming the "foreclosure discount".

•·         Hire a Realtor® who will out market the competition.  Just putting a sign in the yard and flyers in a box won't cut it.  In order to stand out and differentiate your home from sub-par competition like foreclosures and short sales, your marketing efforts need to include an intense online focus with quality details, i.e. virtual tours, lots of good photos, enhanced listings, detailed descriptions, etc.  Make it clear to potential buyers that there's a difference in quality.

•·         Offer minor incentives that highlight some of the advantages your home offers.  Foreclosures and short sales tend to represent increased risk to the buyer as these homes have not been cared for, may have been vacant and neglected for a long time, and can even be tough to inspect thoroughly because the utilities are shut off.  Offering things like a home warranty, a pre-sale inspection report, etc., can draw attention to the fact that your home is a better value because it represents higher quality and less risk.

•·         Make sure you can offer a reasonably quick closing.  Particularly with short sales, timing can be a deal killer for many home buyers.  Waiting for a response from the bank - sometimes for months - is frustrating for many potential home buyers and makes these types of sales a challenge.  With the federal tax-credit deadline looming, timing will become more and more of an issue and is an area where you can easily stand out.

These are just a few tips on how home sellers can effectively compete with foreclosures and short sales.  The main focus should be creating separation on points of interest that matter to home buyers, and marketing those differences in the most effective way.  Understanding the effect these types of transactions have on the residential re-sale market in your area will enable you to plan your home-selling strategy appropriately, and overcome the dreaded "foreclosure discount"!

For more information about Northern California real estate or to contact us, please call 916-774-3151.

Posted by

Phil Boren

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Martin Kalisker
Greater Boston Association of REALTORS - Boston, MA
Professional Standards & Legal Assistant

Good points.  There is nothing anyone can do when the house down the street is upside-down.  But you can market the finer points of your home.  If you are in a community where short sales and foreclosures are driving down prices, then you need to be sensitive to that.  Maybe you could rent for a while instead of sell right away. 

This will all be behind us in the next year or two.  The market needs to rebound and the threat of increasing interest rates still make homebuying attractive in many situations. 

Feb 03, 2010 07:25 AM #1
Phil Boren
RE/MAX Gold, 916-218-7481 - Roseville, CA
RE/MAX Gold, Roseville Homes For Sale

Thanks, I thought the Zillow report quantified some things that might help some sellers and brokers deal with this issue.  I hope you're right about the time when this will all be behind us . . .

Feb 03, 2010 02:18 PM #2
David Salvato
David Home Inspection Service Home Inspector San Bernardino - Los Angeles, CA

Phil Keep those power seller tips coming. I know that people need this stuff

Feb 23, 2010 03:46 AM #3
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RE/MAX Gold, Roseville Homes For Sale
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