How Much Can I Save By Purchasing a Foreclosure Property?
Many of the new Santa Barbara area listings that come on the market every week are foreclosures (or REOs). In recent years, home buyers have become more aware that buying an REO property, while not always the most simple transaction, can be a good way to get a great value. Especially since REOs are often not in pristine or “move-in ready” condition, the first question on most home buyers’ minds is, “How much less than the asking price can I buy this home for?”
Since this question comes up so frequently, lets look at the research, which is surprising. Of all the homes sold through the Santa Barbara local Multiple Listing Service (MLS) between Carpinteria, CA and Goleta, CA, 229 homes have been sold as REOs. Although foreclosures are generally thought of as small, run down houses, they can actually be any type, size or condition of property, which is reflected in their price. These 229 listings sold for anywhere from $65,000 for a 2 bedroom/2 bathroom mobile home to $4,200,000 for a 4 bedroom/5 bathroom estate.
Out of all the foreclosures, the best discount received was about 26% off of the original asking price. On the other hand, another home sold for 121% of the original asking price. There are many factors that determine the final price, but one that is not always a good indicator is actually the original price. For example, the mobile home mentioned above was originally listed for $69,000; thus, it sold for about 94% of the original price. The estate that sold for $4.2 million originally came on at $4.9 million; this represents a 86% sale to list price ratio.
So those are the extremes, but let’s look at the averages. With 229 listings in our sample size, the general belief is that Santa Barbara REOs usually sell for below an already discounted asking price. However, the data shows that the average for all the listings in our sample is 99% of the listing price. So now we know that the average foreclosure will sell for almost exactly what the original list price is.
Another factor people often look at is the number of days a home has been on the market. It is true that the REO’s that sell quickly tend to be the more desirable, nearly always have multiple offers, and often sell for more than the asking price. In the sample data, over half of the 70 homes that were on the market less than two weeks went above the asking price. At the other end, however, every one of the 74 homes that were on the market for more than 60 days went for below asking price.
So there you have it. If you are looking to buy a foreclosure in order to get a bargain, and you want a sure thing, look at the ones that have been on the market the longest.
Do you have specific questions about foreclosures or short sales? Contact Daniel Zia and the Zia Group team by email (Daniel@ZiaGroup.com), phone (805-637-7148), or on Facebook with your questions or to set up a viewing appointment. Our team can provide customized services, help you navigate the Santa Barbara MLS and set up a customized email-based home search for you to track foreclosures and other homes in Santa Barbara for sale at your leisure. Thank you for visiting the Santa Barbara Real Estate blog and we look forward to serving you and your real estate needs.