Many people assume that once a house is foreclosed upon, it can be purchased at a very low cost. This is not always the case. Back in 2009, during the depths of the housing bubble, the average markdown was at 24 percent. According to a report listed in Washingtonpost.com, foreclosed homes are no longer as cheap as they once were. In September 2012, the mean discount for foreclosed homes in America was only 8 percent below market value.
There are many possible causes for the shrinking discounts on foreclosed homes. First is the reducing number of foreclosed homes for sale. Second, the economy has slowly improved and fewer homeowners have defaulted on their mortgages. Third, banks and other lending institutions are starting to favor short sales, loan modifications and other alternatives that keep people in their homes. Moreover, banks are favoring short sales now so the market doesn’t close very quickly.
According to Stan Humphries, chief economist of Zillow, foreclosures often seem to be a bigger bargain when comparing prices of foreclosed and non-foreclosed homes. Humphries said, “The typical foreclosure property is likely quite different than the typical non-foreclosure property.” Humphries noted that less expensive homes are more likely to be in foreclosure than higher priced homes.
According to real estate experts, as of the moment, there is no fire sale on foreclosures. Those selling Fort Myers
foreclosures in Florida are stating that in the past six months, the real estate industry is becoming very competitive once again. If there is something good that hits the market, they’ll be receiving different offers.
Although the industry is on the verge of recovering, it doesn’t mean that people can no longer find affordable foreclosed homes in the market. According to Zillow, in Pittsburgh area, where the highest discounts can be found, foreclosures are at 27 percent. Other places with a topping 20 percent average markdown are Cleveland, Cincinnati and Baltimore.
Nevertheless in certain markets, especially those where home prices fell significantly and investors and buyers have swooped in to buy up foreclosures, discounts have disappeared. In Las Vegas and Phoenix, Zillow discovered that there is “no discernible difference” between foreclosure and non-foreclosure sales. Based on reports, the foreclosure discounts in Washington area is around 5.5 percent. In Sacramento, discounts have reduced to less than 1 percent; in Miami-Fort Lauderdale area about 3 percent and just about 4 percent in Los Angeles.