Short Sale Discounts Vary Widely from State to State
Short sale discounts from regular retail home prices are varying widely from market to market in the US, according to RealtyTrac, an online foreclosure marketplace. This week, RealtyTrac released a report that foreclosure sales took up 31% of all home sales in the US through Q110. According to the report, there were 88,000 pre-foreclosure sales, often short sales, in Q110, for an average discount from retail home prices of 14.7%. By comparison, REO discounts in the US averaged 34%. But while some are seeing large short sale deals above the 14.7%, others are not. The state with the largest discount is Massachusetts. There, according to RealtyTrac, buyers get a home for 32% less on short sales than on buying retail homes. That’s almost as much as the REO discount of 36%. Bill Gassett, a broker with RE/MAX Executive Realty in Hopkinton, Mass., said he’s seeing slightly different numbers, suggesting that short sale discounts vary differently even within states. “I can tell you with certainty that on all the short sales I am working on that [32% discount] is not the case,” Gassett said. Many of the short sales he conducted are often sold 5-to-10% off the fair market value, he said. He estimated that for Massachusetts, the short sale discount was probably closer to 10-to-15%. The smallest difference between short sales and retail prices is South Carolina. There, the average discount is 1.07%. In other words, those who purchase a home through a short sale are not getting much of a deal in South Carolina. In places like Montana and Utah, the average price of a home in pre-foreclosure, or short sale, was actually more than that of a regular home sold that wasn’t in foreclosure. But, like in Massachusetts, those on the ground in South Carolina said there are still some opportunities for discount hunters. “There are amazing discounts right now for buyers in the Bluffton/Hilton Head Island market if they are willing to pursue a short sale,” said Tisha Chafer, a real estate agent with Century 21 Southern Lifestyle Properties in Bluffton, S.C. Bluffton is on the very southern-most tip of South Carolina. The problem, Chafer said, is the process. Once buyers enter into a short sale agreement many of them become impatient with the process and how long it takes. “Even though we tell them the process is typically 3-5 months of waiting, buyers tend to ignore that,” Chafer said. “The moral of the story is, if you are patient and can handle dealing with the time it takes for the bank to process the file then you will be rewarded at the end with a property that you were able to purchase at a great price.” In terms of discounts from listing price to sales price short sales, the difference isn’t too much in Charleston, S.C., said Walter Mueller, a broker at Exit Realty Charleston Group. According to a CMA Pro report for short sales in the city of Charleston for the past year, the average difference between the listing price for a short sale and the actual price at which it sold was 6.3%. Mueller said the listing price is set differently depending on which lender a broker is working for. Some want the listing price set at market value. Others want it listed at the amount of the mortgage balance, while others still have no preference. But Mueller said buyers are becoming more aware of the opportunities short sales and REO provide. “I get a lot of inquiries for the short sales and REO I list. People specifically ask for them. It’s becoming more prominent,” Mueller said. Write to Jon Prior.