IRVINE, CA--(Marketwired - Jul 10, 2014) - RealtyTrac® (www.realtytrac.com), the nation's leading source for comprehensive housing data, today released an analysis profiling what single family homes sell at the deepest discounts and what single family homes sell at the highest premiums based on four variables: foreclosure status, equity, occupancy and year built.
"In a competitive real estate market with still-low inventory and multiple offers the norm, it's more important than ever for buyers and sellers to identify properties that offer the best possibility for a discount and those that are the most likely to sell at a premium," said Daren Blomquist, vice president at RealtyTrac. "A data-centric evaluation of potential purchases is important for both buyers and sellers to help counterbalance the emotions that often emerge during a typical real estate transaction. Those emotions can range from frenzy to fatigue -- both of which can result in poor decisions."
The RealtyTrac analysis looked at 24 discrete property profiles based on the four variables and what average discount -- or premium -- each of those profiles sold for in the 12 months ending in March 2014. The discount or premium was calculated based on the average percentage that properties in each profile sold below or above their estimated full market value, and then comparing that percentage to a control group: all single family homes not in foreclosure that sold during the same time period. The 24 different profiles were analyzed for discount or premium for all U.S. properties and also for each state separately, with the profiles with the biggest discounts varying from state to state.
"Nationwide and in most states we found the types of homes selling at the biggest discount were those that were in the earlier stages of foreclosure, were vacant and had negative equity," Blomquist said. "One notable exception to the negative equity marker was homes in default with positive equity, which sold at the second biggest discount nationwide. The top five property profiles with the biggest discounts nationwide all sold at average discounts of 25 percent or more.
"On the other end of the spectrum, it may surprise many to see that nationwide and in several states some profiles of bank-owned homes actually sold at a premium," Blomquist continued. "Overall bank-owned properties nationwide sold at a 2.5 percent premium, and bank-owned properties built before 1950 sold at a 6.7 percent premium. There were in exceptions to this: for example, bank-owned homes in Ohio sold at a 17 percent discount, and in Michigan they sold at a nearly 13 percent discount."
Top five property profiles with biggest discounts
The property profile providing the biggest average discount was that of a home scheduled for foreclosure auction with negative equity (outstanding amount of loans secured by the property was more than the estimated market value of the property), vacant, and built between 1950 and 1990. Properties matching this profile sold at an average discount of 28.2 percent below market value when compared with the control group of all properties not in foreclosure that sold during the 12 months ending in March 2014.
The property profile with the second biggest average discount was that of a home in default (where the bank had initiated the foreclosure process but not yet scheduled a foreclosure auction) with positive equity. For this profile, the occupancy status included both vacant and occupied properties and all years built. Properties matching this profile sold at an average discount of 26.0 percent below market value, and this profile by far had the most available properties matching it nationwide: 87,882, representing 11 percent of all properties in some stage of foreclosure.
Other property profiles among the top five with the biggest discounts were homes in default with negative equity, vacant and built before 1950 (25.8 percent average discount below market value); homes scheduled for foreclosure auction with negative equity, vacant and no filter for year built (24.7 percent average discount below market value); and homes scheduled for foreclosure auction that were vacant with no filter for equity status or year built (24.6 percent average discount below market value).
Four property profiles selling at a premium
Four of the 24 property profiles analyzed sold at an average premium above market value when compared to the control group. The profile with the biggest premium was that of a home not in foreclosure but with negative equity, with no filters for equity, occupancy or year built. Properties matching this profile sold at a premium of 19.2 percent above market value when compared to the control group of all properties not in foreclosure that sold in the 12 months ending March 2014.
Other property profiles selling at a premium were bank-owned homes built before 1950 with no filter for equity or occupancy status (6.7 percent premium); bank-owned properties with no filter for equity, occupancy or year built (2.5 percent premium); and homes in default with negative equity, vacant and built after 1990 (1.7 percent premium).
States with the biggest available discounts
The top property profiles with the biggest discounts available differed from state to state, as did the biggest percentage discount available for each state. States with the biggest available discounts:
- Illinois: 56.0 percent discount on homes scheduled for foreclosure auction with negative equity, vacant and built between 1950 and 1990
- Missouri: 49.6 percent discount on homes scheduled for foreclosure auction with negative equity, vacant and built in 1950 or earlier.
- Oklahoma: 40.2 percent discount on homes scheduled for foreclosure auction with negative equity and vacant and no filter for year built
- New York: 38.5 percent discount on homes scheduled for foreclosure auction with negative equity and vacant and no filter for year built
- Wisconsin: 37.3 percent discount on homes scheduled for foreclosure auction with negative equity and vacant and built in 1950 or earlier.
Markets with the most properties matching top five profiles with biggest discounts
Metropolitan statistical areas with the most single family homes matching the top five profiles with the biggest discounts in their respective states were led by Los Angeles-Long Beach-Santa Ana, where 5,864 single family homes matched one of the top five profiles -- representing nearly 27 percent of all homes in some stage of foreclosure in the metro area.
"The best homes for re-sale are the houses in good neighborhoods within great school districts," said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. "It's always a better deal to buy the least expensive house in a better neighborhood and fix it up versus buying the best turnkey home in the area."
About 9 percent of homes in some stage of foreclosure matched one of the top five discount profiles in the Chicago-Naperville-Joliet metro area, but the 4,365 properties represented by that 9 percent was the second highest total nationwide.
The Philadelphia-Camden-Wilmington metro area had 3,438 single family homes matching one of the top five discount profiles, the third highest total of any metro area nationwide and representing nearly 17 percent of all homes in some stage of foreclosure.
Other markets in the top 10 for most homes matching the top five discount profiles were Riverside-San Bernardino-Ontario in Southern California (3,018), Miami-Fort Lauderdale-Pompano Beach (2,714), Atlanta-Sandy Springs-Marietta (2,544), New York-Northern New Jersey-Long Island (2,344), Columbus, Ohio (1,838), Cleveland-Elyria-Mentor (1,774), and Denver-Aurora (1,548).
"When consumers are considering what home makes the best deal there are many amenities to consider such as location, curb appeal and age of home," said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton, Ohio markets. "To determine the best deal when making a home purchase consumers must be true to themselves and their own personal goals in regards to the timing of a purchase, anticipated length of stay in the home, values of homes in the vicinity, proximity to work and reputation of local schools."
"The properties that seem to be the best deals are those with easy access to transportation -- bus stops, park-n-rides, light rail stations and highways," said Kelly Moye of RE/MAX Alliance, covering the Denver, Colo. market. "More affordable properties in good condition that would make good rentals are also high in demand as the rental market is seeing record rental rates and very low vacancy."
|10 Markets with Most Homes Matching Top 5 Discount Profiles |
|Metropolitan Statistical Area||Number of Properties Matching Top 5 Discount Profiles||Percentage of Total Foreclosure Market|
|Los Angeles-Long Beach-Santa Ana, CA||5,864||26.72%|
|Riverside-San Bernardino-Ontario, CA||3,018||15.66%|
|Miami-Fort Lauderdale-Pompano Beach, FL||2,714||4.82%|
|Atlanta-Sandy Springs-Marietta, GA||2,544||15.47%|
|New York-Northern New Jersey-Long Island, NY-NJ-PA||2,344||3.82%|
For this analysis, RealtyTrac evaluated historical sales data for single family homes from Q2 2013 to Q1 2014. RealtyTrac broke down the sales into 24 property profiles based on four variables: equity, foreclosure type (pre-foreclosure, auction, bank owned), year built, and occupancy status (vacant or occupied). The 24 property profiles were evaluated nationwide and by state. To calculate the discount or premium, RealtyTrac first determined the average percentage of estimated value represented by the actual sales price (sales price divided by each property's estimated market value) and then subtracted that percentage from the same calculation for the control group: single family homes that were not in any stage of foreclosure or bank-owned. For any possible combination tested, where the count number for the state was less than 40, the national discount percentage was used instead. The results were than ranked on a state level and on a national level.
|Discounts and Premiums Available by U.S. Property Profile |
|Property Profile (All Single Family Residential Property)||U.S.|
|Discount/Premium=Avg Pct Below/Above Market Compared to Control||Discount/Premium|
|Auction + Negative Equity + Vacant + 1950 < Effective Year Built > 1990||-28.2%|
|Default + Positive Equity||-26.0%|
|Default + Negative Equity + Vacant + Effective Year Built < = 1950||-25.8%|
|Auction + Negative Equity +Vacant||-24.7%|
|Auction + Vacant||-24.6%|
|Auction + Negative Equity + Vacant + Effective Year Built < = 1950||-23.8%|
|Auction + Negative Equity + Vacant + Effective Year Built > = 1990||-23.6%|
|Auction + Positive Equity||-23.6%|
|Default + Negative Equity + Vacant + 1950 < Effective Year Built < 1990||-22.4%|
|Default + Negative Equity||-20.9%|
|Default + Vacant||-20.2%|
|REO + Vacant||-18.2%|
|Auction + Negative Equity||-16.8%|
|Default + Negative Equity +Vacant||-16.4%|
|Control+ Positive Equity||-7.6%|
|REO + Effective Year Built > = 1990||-6.3%|
|REO + 1950 < Effective Year Built < 1990||-1.7%|
|Default + Negative Equity + Vacant + Effective Year Built > = 1990||1.9%|
|REO + Effective Year Built < = 1950||6.7%|
|Control- All SFR transactions without foreclosure event||0.0%|
|Sales Price Percent of Estimated Market Value on Average||1.10|
The RealtyTrac U.S. Residential & Foreclosure Sales report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.
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RealtyTrac is a leading supplier of U.S. real estate data, with nationwide parcel-level records for more than 125 million U.S. parcels that include property characteristics, tax assessor data, sales and mortgage deed records, Automated Valuation Models (AVMs) and 20 million active and historical default, foreclosure auction and bank-owned properties. RealtyTrac's housing data and foreclosure reports are relied on by many federal government agencies, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.