It seems like I get calls every week from a potential buyer trying to tell me how they are going to steal a bank owned home. No disrespect to the internet savvy buyer who is led to believe that they can pay pennies on the dollar for bank owned homes. That has NOT BEEN THE case in Northwestern Lower Michigan but things may be changing.
The numbers say it all…
PERCENTAGE OF BANK SALES - The percentage of bank owned homes sold in the Grand Traverse Region has dropped by 33% in the past 2 years.
In September 2009 31% of homes sold were bank owned.
In September 2010 30.4% were bank owned.
In September 2011 just 22.6% were bank owned. A 33% drop from just 2 years ago.
MEDIAN SALE PRICE - The median Sale price of bank owned homes fell while non-bank owned homes rose substantially.
Year Bank Owned Non-Bank Owned
2009 $81,500 $154,900
2010 $68,500 $172,450
2011 $71,000 $176,173
The median price of bank owned homes dropped 12.9% from 2 years ago while non-bank owned homes rose 13.7% from this time 2 years ago.
AVERAGE DAYS ON THE MARKET – The standard for determining if it is a “Seller’s Market” or “Buyer’s Market” is determined by the number of Months Supply of Inventory (MSI) a given market has. For example anything over 6 months is generally considered a “Buyer’s Market”
Since August 2010 the market in the Grand Traverse Area has been split with it being a “Seller’s Market” for bank owned homes and a Buyer’s Market for non-bank owned homes. In September the MSI for Bank owned homes has climbed to 8.9% the highest it has seen in over a year. The MSI for non-bank owned homes hovers around 29.4 months.
So what does this tell us exactly? Well, what we have seen over the past year is relatively quick sales on bank owned inventory while non-bank owned homes still struggle against the deeply discounted foreclosure market. The trend is showing a reduction in bank owned inventory, in this are anyway, and a slow but steady increase in the price of non-bank owned homes.
So are there still bargains out there? Absolutely. Typically any home that is financeable under current federal guidelines will sell relatively quickly and in many cases for more than list price. Those properties that require extensive repairs often sit until the bank makes it lucrative for a cash buyer to pick it up.
The good news with those properties is we generally see them refurbished and back on the market as rental properties or as nearly new (and financeable) homes. The key to getting the best deal is:
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Know Your Limitations – Be sure you secure financing in advance of looking. A good REALTOR will help you find the right home.
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Have Reasonable Expectations – Don’t think you can steal every home. Look at the home on it’s own merits and determine what it’s really worth before “low balling” the price just because it is a bank owned home.
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Be Prepare to Pay Over List Price – Despite the media hype, many homes in this are sell for well over list price. That’s not necessarily a bad thing. Often times a home is undervalued and even above list price it can be a bargain. Don’t let emotion cloud your judgment.
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Expect Road Blocks – With any bank owned property you will come across added delays, issues or other problems which are typical for this type of transaction. Expect them and be patient.
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Work with Professionals – Don’t be an armchair quarterback. Listen tot eh professions you are working with. They do this every day and believe it or not they are generally giving you good sound advice. Listen to them and keep the emotion out of it as much as possible. This is especially true when a friend or relative tells you the opposite just because they read an article on the internet. Each market is unique, just keep that in mind.
NOTE – Information gathered from the Traverse Area Association of Realtors. Information deemed accurate but not guaranteed.
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