Both North Seattle short sales and North Seattle bank-owned homes can potentially be a bargain. But are they always a bargain relative to comparable non-distressed North Seattle homes? Is the extra hassle, uncertainty and risks of buying a distressed property worth it?
The short answer is , No!
I did a direct comparison of the sales of three bedroom North Seattle single family in the following zip codes: 98103, 98105, 98107, 98115 and 98117 as shown in the map. Homes were divided into three different groups.
- Non-distressed: owner has some equity in the home
- Short sales: owner’s mortgage is greater than market value of the home
- Bank-owned homes (aka REO) that have been repossessed by the lender and re-listed for sale
I looked at the following 3 month rolling average statistics from March 2011 through March 2012 (data was extracted from the NWMLS and compiled by yours truly):
- The median sale price
- The number of days on the market
- The number listings for sale
How does the sale price of these properties compare?
As can be seen in the above plot, in 5 different months over the past year, the median sale price of short sale single family homes was the same as non-distressed three bedroom homes. Because of the low current inventory, more people are “forced” to look at short sales who might otherwise not be willing to buy them. Surprisingly, the median price of bank-owned homes was lower than short sale homes. Would have expected the opposite to be the case. I rechecked the data and it looks like that is indeed the case.
So how long does it take a North Seattle home to get an offer?
With the large drop in the current inventory of available homes, the previous gap between the average number of days for non-distressed homes to get an offer compared to distressed homes has narrowed. In March 2012, all types of North Seattle homes were getting offers, on average, within 25 days. The average for non-distressed home is very stable because, statistically, this is a much larger number of listings, whereas the number of distressed properties is relatively low (see below) resulting in greater month-to-month fluctuations.
And finally, how do the numbers of distressed and non-distressed North Seattle homes compare?
As I’ve posted previously, there has been a big drop in the number of homes for sale in North Seattle and elsewhere. As the graph shows, the number of non-distressed homes for sale has dropped by two thirds since last year while the numbers of North Seattle short sales and bank-owned homes have stayed low (less than 15 on average). No wonder the time on market is the same for all three types of homes. Buyers are motivated and now willing to go after distressed homes because of the reduced inventory…supply and demand at work.
The moral of the story is:
No, North Seattle short sales and bank-owned homes are not always a bargain. Frequently, they are the same price as conventional North Seattle homes, particularly now because of the low inventory of listings.
Have your North Seattle Realtor do a market evaluation of the home before you make an offer. If you’re not getting some guaranteed instant equity (min 20%), do you want to deal with the extra hassles, time to close and much greater chance of not closing at all? You have about a 50% chance of closing on a short sale home and could be waiting a long time for the privilege of finding out.
North Seattle bank-owned homes are a good alternative to short sales and tend to be a less complicated and faster process.