Do Sacramento Investors get a better deal on a bank owned home, private party sale, or a short sale?
July 1, 2010 Featured, Real Estate Statistics
So what is the answer? Does a Sacramento Investor get a better deal on a bank owned home, short sale, or private party sale?
This month, I thought I would break down Sacramento into three categories and report to you what is going on in each.
The three types of homes for sale right now in Sacramento. They are… ———————> 
My clients often ask which category provides the best deal in our market! I thought I would take some time and break down each type of investment opportunity available and show you which one is a better deal.
Just a quick lesson for those of you who do not completely understand the three categories… let’s review them for a minute.
Sacramento Short sale: These transactions involve a sellers who owes their bank more than their home is worth. The buyer makes an offer to the seller, then the seller has to obtain a short sale approval from their bank. This means the bank agrees to release the lien (mortgage) on the home, even though they will not be paid back in full.
Sacramento Bank Owned Home: These homes have been foreclosed on and are now owed by the bank and are more than likely vacant.
Private party sale or Other: These are homes that are NOT bank owned or short sales. They are private party sales, probate sales, bankruptcy sales and other non bank owned or short sale transactions.
Now that we are all on the same page… Let’s look at some numbers! First off lets look at Sacramento Real Estate Market as a whole.
As you can see, we have 4365 active listings for single family homes for sale in the Sacramento market. Of those listings, 2454 of them are new listings and 2217 are pending sale. In the month of May 2010, 1668 single family homes sold out of the 4365 homes for same in Sacramento.
Here are some statistics to help you compare what is going on with bank owned homes, short sales, and private party/other sales:
The first item we are going to look at is how long on average bank owned homes, short sales, and private party sales stay on the market before they are sold.
It makes sense that short sales lead the pack having the most average days on the market (DOM) of 146.
The short sale process can take months to get an approval back from the bank. This makes sense that short sales take much longer to closes escrow than the other two categories.
Sacramento Bank owned homes are in 2nd place at at 47 days on the market and private party sales are at 46. This is because these homes are ready to sell today as opposed to a short sale.
Next… let’s look at average cost per square foot for Sacramento homes that have been sold.
If you compare on average the cost per square foot of a bank owned home, short sale listing, or private party sale… the best deals on average is the Sacramento bank owned home.
As you can see, you can get the cheapest square foot cost for a bank homes home. Normally there are issues with the condition or maintenance of these homes… which provides a discount in price.
Sacramento Private party sellers are selling their homes as quickly as banks, but are netting over 3 times as much! That is great news for those looking to sell a Sacramento home or investment property.
Finally… let’s look at how many months of inventory we have left in the Sacramento Real Estate Market.
If you look at all the single family homes currently on the market, it would take us an average 2.6 months to sell every last house currently for sale in Sacramento County.
I thought it would be fun to check the absorption rates for each of our three categories (bank owned, short sale and private party sale).
What is the absorption rate?
The absorption rate tells us out of the available homes for sale in Sacramento County, how many were absorbed (purchased) by buyers.
Again the bank owned homes win again! Over 66% of the bank owned homes that were available to buy in May 2010 were sold.
When you compare that to figure to a short sales at just over 27% and private party sales at 33%… Sacramento bank owned homes are certainly getting snapped up 2 times as much as short sales and private party sales.
In conclusion, bank owned homes provide you on average the best price, but as you can see there is more competition for these homes based on the absorption rate.
Be prepared to move quick when a new bank owned home comes up for sale… because other buyers will be.
On another note… short sales don’t provide you on average more of a discount than a bank owned home. Why not save yourself the hassle if you can and choose a bank owned home instead?
Expect to pay more for Sacramento private party homes for sale, but remember they are often in much better condition than a short sale or bank owned home.
Keep in mind these are averages and every neighborhood will reflect different numbers, but it will give you a indication of what is going on in our Sacramento Real Estate Market as a whole.
Comments (3)
WOW, this was a real eye opener. I guess I should change my focus from short sales and take a closer look at REOs.
thanks….
Thanks Don! It was an interesting post to write! I was surprised Private party sales are getting so much more per per sq ft … but it would make sense with all the home flipping that is going on right now in our Sacramento market.
Thanks for the comment!
This was a very good, and enlightening, article. it put a lot of data together in ways that are informative and helps investors make good decisions. Thanks for sharing.