How Much of a Price Discount is in a Delaware Foreclosure?
A recent article in Real Estate Economy Watch poses a popular question: just how good of a deal is a foreclosed home, anyway?
It depends on the condition of the home, and the bank’s motivation, and the home location. The strength of the local economy also plays a role. The amount of discount can also be influenced by the supply of foreclosed homes on the books, and the price that investors are willing to offer on them.
How cheap can a foreclosure get? The amount of reported discount varies by source. Per a national appraiser, the average foreclosure discount was 12.2% off of fair market value at the end of 2012. During 2011, the average foreclosure discount was 13.4%.
But according to the National Association of Realtors, the January 2013 discount levels are about 20% below market value. They estimate that discounts averaged 25% or more during the peak of the foreclosure crisis.
Foreclosures that require repair have seen greater discounts in recent months. According to HousingPulse, the average price for a damaged foreclosure in January 2013 fell to $88,100. This is 17.1% below the average price recorded a year ago, and also the lowest average price for this kind of property in the past four years.
As home inventory narrows, one might expect foreclosure discounts to soften, but in parts of the Midwest and Northeast, we are seeing the opposite trend. One reason is that investors are dominating the foreclosure market, with fewer buyer-occupants entering the fray. It is difficult for a home buyer who needs a mortgage to complete with a cash buyer who can close tomorrow.
When you look at foreclosure discounts city by city, the degree of price discount can be vastly different from the national averages. Here is a sample of where foreclosure discounts stood in major markets at the end of 2012:
- Baltimore, MD 29.6%
- Pittsburgh, PA 30.2%
- Philadelphia, PA 33.3%
- Boston, MA 33.0%
- New York, NY 28.2%
Thankfully for homeowners, we are seeing fewer foreclosures and a higher ratio of short sales in the market. But it’s clear that the foreclosures coming to market are being priced aggressively. For this reason, home values in Wilmington and Newark will continue to be impacted by foreclosure discounts. How much of an impact depends on how many foreclosures we have vs. market value sales.
As your professional Wilmington and Newark, DE real estate agent, I have the experience in short sales and foreclosures to help you buy or sell distressed properties successfully! Please contact me today with any questions you may have!
Katina Geralis
Wilmington, DE Real Estate Expert
Keller Williams Realty
Wilmington Real Estate
Wilmington Homes for Sale
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