I will be posting a blog the first week of each month, comparing "Traditional Listing" Sales vs. Short Sales in Phoenix. These numbers were just released two days ago by the Cromford Report.
For the purpose of this blog, the term "Traditional Listing" refers to your typical "non-distressed" listing. A Short-Sale Listing, is, well, a Short-Sale Listing, whereby the Seller sells the home for less than what is owed on it. Let's dive into the numbers for July/2009 Phoenix Short Sales....
Phoenix Short Sale Listings vs. "Traditional" Listings-JULY/2009
Number of Active Phoenix Short Sale Listings: 2,267 (4% INCREASE over June)
Number of "Traditional" Active Short Sale Listings: 2,596 (1% DECREASE over June)
Number of Phoenix Short Sales Closed: 282 (33% INCREASE over June!!!)
Number of "Traditional" Listings Sold: 481 (12% INCREASE over June)
It looks like Buyers and their Agents are finally "getting it"! While one month does not tell all, it is encouraging to see Buyers purchasing more short sales, and I hope to see this number increase over the next few months. Why are Buyers purchasing more Phoenix Short Sales, you ask?....
Average Price/Square Foot of Phoenix Short Sales that sold in July: $88.68 (3% INCREASE over June)
Average Price/Square Foot of Phoenix "Traditional" listings sold in July: $119.94 (3% DECREASE over June)
So, what happened, you may ask? There is a saying in today's market that "Todays "Traditional Listing" is tomorrow's Short Sale Listing", and I think this is beginning to ring true in today's Phoenix Market. Due to the rapid declines in value, many Sellers now owe more than what their home is worth. Ideally, they would like to at least "break-even", and sell for what they owe on their home. In this scenario, the Seller lists their property at a price that will allow them to either "break-even" or make a few dollars, if possible. When reality sets in, and Sellers realize they are competing against Short Sales and Lender-Owned homes in their area, they eventually understand that if they truly want to sell their home, they need to do it through a Short Sale. Obviously, not all Sellers fall into this category, but many do. I expect to see this trend continue, as more and more Sellers come to grips with the reality of today's market.
With all that being said, Short Sales still appear to be a tremendous value for Buyers. In this case, buying a Short Sale, on average, equates to a savings of approximately $31.00 per Square Foot when compared to buying a Traditional Listing. Put another way, a 2,000 square foot Short Sale is selling, on average, for $177,360. That same house, without distress, is selling, on average, for $239,880. This is a savings of almost $63,000.00!!!!
So, the question that begs to be asked....Why are Buyers buying non-distressed homes vs short sales? Great Question! Here is what we are seeing/hearing in the market:
1. Buyers need a home in the next 30-60 days. This pretty much knocks out a short sale, as the typical process is taking anywhere from 4-6 months. In cases like these, we've actually been putting our Buyers into 6 month or 12 month rentals, which gives them time to better evaluate the short sale market, make an offer, and wait for the process to work.
2. Buyers Agents are steering their clients away from short sales. Let's face it. Read the blogs that are being written everyday by bitter agents, and how they despise short sales. You'll hear things like "Short Sales are too much work", or "The lenders are idiots", or my favorite, "Chances are, the lenders are going to reduce your commission". I'd be willing to bet that these agents have had bad experiences with short sales because they simply do not know how to manage them, and took on listings they should have never taken on in the first place. Another factor in this equation is the time it takes for an agent to get a deal closed. Some agents don't like to wait an extra few months to get their coveted commission check, and a short sale is not a quick and easy process.
We frequently get calls from frustrated Buyers. Typically, it goes something like this..."I tried to make offers on 10 homes in the past week, and all of them already had multiple offers on them". The first question I ask is "What type of listing were they?". Nine times out of 10, they were either "traditional" listings or REO (Lender Owned) homes, most of which that had recently had signficant price drops. I simply tell them that they are competing with wayyyyy too many other Buyers (as evidenced by the statistics above). When I show them numbers like the ones above, it starts to make sense, and we begin looking at short sale listings and/or looking for rental homes.
Folks, patience is a virtue, and buying a home can be a very emotional process. If you are truly looking for a good buy in today's market (and there are tons of them out there), try taking some of the emotion out of your decision-making and think rationally. So what if you have to wait 6 months to move into the home of your dreams! Five years from now, when you want to sell that home, you'll think back and be very proud of your decision to have some patience.
I hope you found the information in this blog to be helpful. Ed Cheney and myself are partners at Summit Home Consultants. We are both CDPE (Certified Distressed Property Experts), and spend the majority of our time helping Buyers and Sellers with the Short Sale Process. Yes, it's a lot of work, but very rewarding when all is said and done. We help Sellers avoid Foreclosures, and we help Buyers get great deals! What more could you ask for?
Feel free to visit our website to learn more about what we have to offer. As always, feel free to contact us with any questions/comments. Until next time.
Designated Broker-Summit Home Consultants
Designated Broker-Summit Home Consultants