There are distressed sales in almost every market. Before we look at Mammoth Lakes specifically, it is important to understand the definition of distressed sale.
A distressed sale in real estate is defined as the urgent need to sell property when the owner can no longer make the mortgage payments. He/she must sell the property immediately to pay off the mortgage, even if it involves losing money on the property. There are two primary types of distressed sales:
Foreclosure: A situation in which a mortgage lender takes possession of the property because the borrower has not made payments on interest or principal for a certain period of time.
Short Sale: An agreement between a mortgage borrower in distress and the lender that allows the borrower to sell the house and remit the proceeds to the lender. A short sale is an alternative to foreclosure or a deed in lieu of foreclosure.
Foreclosure-related sales are on the decline but distressed sales continue to claim a “disproportionately high portion” of total home sales across the country, according to RealtyTrac’s most recent foreclosure and short sales report. The firm also found increases in prices for distressed properties in 2012.
Distressed property sales made up 43 percent of all home sales nationwide in 2012, according to RealtyTrac. Foreclosure-related sales made up 21 percent of all sales, while non-foreclosure short sales made up 22 percent of sales. Together, foreclosure and REO sales decreased 6 percent from 2011 with a total of 947,995 sales over the year in 2012.
Here in Mammoth Lakes, in 2012 distressed property sales made up 41 percent of all home sales. Foreclosure sales made up 15 percent of all sales and short sales were 26 percent.
A qualified licensed real estate agent can provide information on available distressed sales. Often the lender has special requirements for buyers and although there are some “good deals,” patience is a virtue when dealing with distressed sales.
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What happens when you receive multiple offers on your property? Should you accept the highest offer?
This is a great question and I recently faced the same dilemma myself. Last week, my husband and I listed personal property for sale and the same day we had five offers! All the offers were over the asking price and we were tempted to go with the highest price. The offers ranged from $1,000 over asking price all the way to $25,000 over asking. Sounds like an easy decision, right? Not so fast. After careful review it became apparent the highest offer was not the most favorable offer.
All the offers were contingent on the buyer obtaining financing. Three of the offers had “pre-approval” letters and the other two had “pre-qualify” letters. (Note: pre-approval is further along in the process than “pre-qualify”). One of the pre-approval offers was going to pay 50% cash and finance the rest. When buyers are obtaining a loan that means an appraisal is going to be required by the lender. The first question was what would the appraisal be? Although we didn’t know for sure, we did know what the comparable sales were for the last 6 months as well as the current listings. With this knowledge, we guessed the appraisal would come in a little under asking price. Assuming that was the case, how much out of pocket were the buyers willing/able to come? After speaking with the other agents, it was obvious only one seller could come out of pocket for the difference. This was not the highest bidder but the 3rd highest. The highest bidder was only willing to come out of pocket an additional $10,000. After quick math that took their actual offer below the bid we accepted.
If we would have jumped at the highest offer we could have seen the deal fall apart in escrow. At that point the other buyers may have moved on to another property and we would have to start all over. Worse, the deal could be held up in escrow.
In summary, a qualified agent and solid information can help you make an educated decision when reviewing multiple offers. The highest offer is not always the most favorable.
For previous articles, visit www.sonjabush.com
On average, serious buyers look at 15 homes before making an offer. This gives them an idea of the market and competitive pricing. If you overprice your property you will usually lose those serious buyers—even buyers who love the home—because those buyers often assume that a reasonable offer on an overpriced home will not be accepted.
When pricing your home, consider this:
- A high price on your property makes other comparable properties more attractive—and helps sell the competition
- Overpricing means fewer buyers, showings and offers
- Inflated prices often lead to mortgage rejections and critical time loss waiting for financing approvals
- Homes that sit on the market for long periods of time lose interest and are shown less
Know what comparable homes are selling for….actual SOLD prices are much more helpful than listing prices.
When selling your home setting a fair price will often net you more money that asking an artificially high price. Pricing your home correctly will often create a multiple offer situation causing the home buyers to compete against one another.
Selling your home with too high of a price tag will scare off potential buyers. Setting an artificially high price may cause your property to languish on the market for months. Here are some of the factors to consider in pricing your home.
- Economic conditions
- Supply and demand locally
- Seasonal influences
- Average home prices in the area
- Your properties extras
To determine the value of your home, ask a licensed agent to prepare a market analysis for you, showing the recent selling prices of properties comparable to your own. The agent can help you adjust for the unique features of your own property.