Short Sales vs. Bank Owned vs. Traditional Sale in Santa Clara County May 2011


Good morning everyone!  I’m asked this question everyday so I thought I would talk about it!  Short sales vs. REO’s aka (bank owned) vs. traditional sale and what should I go after when I’m ready to buy. 

I always say go after what you like because of location, size, condition, and most importantly what you can afford.  Once I explain how the short sale process is handled these days, buyers have second thoughts, but there are some who still want to go the distance and write an offer because they think they can get a better deal.  At the end of the day be prepared to wait between 3-6 months for any response. 

As of May 2, 2011 the average length of time from the actual list date to close of escrow date is 333 days total on Short Sale Properties and these numbers are for single family homes that have sold in Santa Clara County 2011.  Short sale homes make up 22% of the home sales this year as compared to 17% REO’s and 61% traditional.   Now, compare that to 2009 when we hit the highest in Santa Clara County at 59% listed were distressed homes (short sale & reo’s) vs. today only 39%.   Keep in mind there were some areas of Santa Clara County like East Side San Jose where the distressed homes on the market equaled 98% of the inventory in Alum Rock MLS area while others were 0% like Palo Alto.  Today East Side San Jose is down to only 48% of the homes listed are distressed.  So, while we are not out of the slump things are getting better. 

One thing many homeowners don’t realize when it comes time to short sale their home is that they must prove that they are in a hardship like a job or salary reduction, divorce or separation, debilitating illness, medical bills, business failure, excessive debt ect.  The bank has to approve the sellers in their hardship as well as the offer written and there lies the 3-6 month process before you ever receive an answer on what you think is a great offer.  Unfortunately many buyers who are not educated about the long process before falling in love with a short sale get to experience the emotional roller coaster only to leave the short sale, and submit on another home that is a traditional sale that I’m sure is listed for more money.  There is the other issue…buyers once in love with a great home that is a “short sale” only listed for $450,000 while others in the neighborhood are listed for $500,000 feel that the traditional should be $450,000 as well.  The reality is that the short sale home list below market because that’s their way of getting buyer attention since it’s labeled “short sale” on the mls that generally deters realtors and their buyers.  At the end of the day banks counter offer a much higher price or by the time the bank responds the buyers are usually long gone.   The last thing to think about is not all short sales even make it to the escrow process because they end up foreclosing, and the bank takes back the home which leaves out the seller and buyer that has been waiting for a simple response after 3-6 months or in many cases longer. 

REO properties that have closed this year from list date to close of escrow date averaged 128 total days.  Even though they only make up 17% of total single family homes that have closed this year they are averaging a 260% faster close than Short Sales simply because the bank already owns the home and they must get rid of it.  A short sale the home owner still owns the home and most cases is still on time with their mortgage. 

Traditional home sale properties that have closed this year averaged from the time they listed on the mls to the time they closed escrow and exchanged ownership has been 122 days or 273% faster than short sale listings.  So, you can see how close the REO properties and Traditional home sales are.  The process is not only faster, but smoother for all parties involved.   

Here are some more numbers to look at! 

                      Santa Clara County                    

 

Traditional

Short Sale

Bank Owned (REO)

Distressed Total

2008

74%

9%

17%

26%

2009*

51%

15%

34%

49%

2010

65%

19%

16%

35%

2011

61%

22%

17%

39%

 *The year Santa Clara County bottomed out 2009 median price of $442,000 and now currently $586,000 as of May 1, 2011 up 32.5%↑.

Enjoy!

 
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