Bank owned or REO sales accounted for 32% of the sales in October.  The median was signifcantly lower at $1390,950.  These properties saw the fewest days on the market with an average of 96 days.  These listing received on average 99% of asking price.  The median sales price wasn’t helped much which only 3 homes sold over the $500,000 mark and almost 80% of the sales at the $200,000 or below price point.

Short sales accounted for 27.9% of the sales in October.  They brought in a higher median sales price than the REO properties at $161,000.  They unfortunately average the longest market times of 199 days.  Short sale listings received an average of 99.1% of their asking price.  The short sale median sales price was definitely bolstered by a $1,200,000 sale.  There were 4 sales over the $500,000 mark.  70% of the short sales were under the $200,000 price point.

What does all this mean???  Sellers with equity can successfully sell their homes in a distressed market given that they have realistic expectations of the price.     Bank owned/REO sales net the banks less than short sales, a continued argument that banks seem to be getting finally.  And lastly, short sales aren’t just for homes in the lower price points.  You can do a short sale on a $1 million home.  You just have to prove to the bank that you have a hardship and that it’s in their best interest to not take the property back onto their books.  It can be done.

The total number of sales for the Sparks area  (MLS area 108) dropped slightly from 2009 to 2010, down about 6.1%.  In addition, the median price also fell from $170,000 in 3rd Q 2009 to $160,700 in 3rd Q 2010, a drop of 5.5%. 

There are currently (as of 10-22-2010) 568 active listings available to buyers in the Sparks area market.  Of these 48.6% are short sales, 34.4% are traditional sales and 16.9% are bank owned.  Key here for buyers is to make sure you have a buyer’s agent working for you that knows the ins and outs of short sales – doing your homework before making an offer on a short sale is key.

Bank owned properties continued to earn the highest list to sale price ratio.  In 3rd Q 2010 bank owned lisitngs got an average of 99.6% of the asking price, short sales 98.9% and traditional sales 97.4%.  Fewer foreclosed properties at low prices, continued mis-understanding of short sales and over-priced traditional listings drive these numbers.

As expected short sales have the highest average number of days on market.  For 3rd Q 2010 short sales averaged 184 days on market, bank owned 79 and traditional sales 77.   As a note the average number of days to close a short sale is relatively the same between 2009 and 2010.  We keep being told by the banks that they are improving their processes.  Hopefully this will reflect soon in our average days to close a short sale.

According to a Yahoo.com report on 10-20-2010 more than 55% of the active mortgages in the Reno-Sparks area are upside down.  I think we will continue to see more and more short sales as homeowners become more educated about short sales as an option to foreclosure.  The key is making sure that you select an agent that is highly skilled in the short sale areana and get legal and tax advice as well.

Buyers looking for a home in today’s market are forced to consider short sales as they account for 57.9% of the active listings.  What is not surprising is the number of buyers waiting for short sale approval.  There are currently 1,591 pending sales that are classified as short sales in the Reno-Sparks area, while only 764 are other sale types.  So, in the pending category the number of short sales is 67.5% of pending sales.

Short sales still remain a long and sometimes frustrating process for both buyers and sellers.  Many loan servicers are overwhelmed by the volume of offers they are processing which leads to long wait times for approvals or even for a response.  Be sure that your agent is knowledgeable about the short sale process.

Since what is owed to the bank is almost always more than what the property is worth, very few Trustees’ Sales result in a successful closing. If the Trustee’s Sale is unsuccessful the property reverts to the bank or loan servicer and is now considered REO, or “real estate owned” property.

The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will typically negotiate with the IRS and local municipalities for removal of tax/municipal liens and they normally pay off any homeowner’s association dues. As a purchaser of an REO property, the buyer will typically receive “clear title” and the opportunity to thoroughly inspect the property. These are the properties buyers will typically see on MLS.

A bank owned property might not be a great bargain. Do your homework before making an offer. Make sure that the price you’re offering is comparable to similar homes in the neighborhood. Consider the costs of renovation. Last but not least, consider your loan type and down payment amount. Loans with high “loan to value” (small down payment) generally require that the home be in good condition.

 A well informed real estate agent, representing the buyer exclusively is invaluable in such a transaction. There are many pitfalls and complications that can be avoided with such representation.