Looking at the sales history of a property can be very telling. In fact, you can often get clues into the happenings of the real estate market. Here is an interesting sales history for a Sacramento fourplex I came across in the course of a current appraisal I’m working on. This is not at all atypical because the market for residential-income properties really boomed in Sacramento (and then it fell hard too).

7/25/2000 – $110,000 sale
7/16/2002 – $278,000 sale
8/18/2004 – $435,000 sale
2/10/2005 – $459,000 sale
9/08/2008 – $377,500 sale  (maybe a short sale – did not list in MLS)
5/01/2009 – $104,250 (transfer to bank – foreclosure)
7/13/2009 – $140,000 sale

What do you see? Does anything stand out to you? Let me know if you have any questions about the local real estate market or your neighborhoood. One of the things I enjoy most about my job is that I get to talk with local home owners and real estate agents about important decisions they are making.

Language is important. The way we describe things can evoke certain emotions and reactions, so we must choose our words carefully. This is true in all aspects of life, and definitely true in real estate. I always smile when I see the ways agents attempt to not say “bank-owned” or “REO” or “Foreclosure” in listings. I suppose if potential buyers would be put off by “FORECLOSURE”, then by all means, use a different word or phrase. In place of “bank-owned” I’ve seen “corporate-owned” or “owned by the mortgage company” or “lender-owned” or “liquidation sale”.

If you were in the market to purchase a property, would it matter to you whether something was labeled as “corporate-owned” or “foreclosure”? Is there any stigma in your mind for a home that is selling as bank-owned?

Last Friday the Sacramento Bee came out with a story that Dorthea Puente’s old house at 1426 F Street in Sacramento would be going up for sale. Who is Dorethea Puente, you ask? She is a woman who ran a “boarding house” in the 1980s out of her Sacramento Victorian duplex. Unfortunately though instead of finding respite her tenants were drugged and murdered so their social security checks could be cashed. Eventually seven bodies were found buried in Dorothea’s backyard.

This property sold for $560,000 on 08/31/2005, went into foreclosure last year, and is now listed on the market at $309,800 as of 02/26/2010. The current MLS listing states, “Property has notorious history that must be disclosed.” 

Would you have any problems purchasing a property like this? Or would you consider renting this house? Would it bother you on any level or be no big deal? Creepy? Good investment? If you are a real estate agent, have you had experience selling a property with a stigma due to a murder, violent crime or some other heinous or notorious issue?

Original photos of 1426 F Street (it was a bit cloudy today unfortunately):

What sort of a price difference is there between bank-owned properties (REO), short sales, and arms-length transactions in the market? For an example, let’s take a look at a trend graph of all sales in Rancho Cordova below, where blue dots are REO sales, green dots are Short Sales and red dots are typical arms-length sales (per Sacramento MLS).

Each neighborhood, niche, and location will differ in results, but generally speaking, like the data above seems to show for Rancho Cordova sales over the past 2 years, buyers tend to pay more for houses that are non-distressed transactions (notice how the red dots on the graph above tend to be located toward the top and NOT the bottom). When it comes to REO properties, it looks like the price level is a bit higher overall than short sales, though there are quite a few short sales on the upper-end of the market too. In fact, both Rancho Cordova and Sacramento County saw a 7% increase in short sales last year in comparison to the year before, so clearly there is a greater acceptance for short sales in the marketplace.

One important observation is that most of the sales at the bottom of the market are bank-owned. Why is that? Investors typically gobble up the lowest end of the market with all-cash offers because fixer-type properties at the lowest level will not qualify for conventional or government financing. This means first-time buyers utilizing conventional or FHA financing will usually need to look to a price level above the “all cash” market. In light of this segmentation, imagine scraping off the bottom layer of all-cash foreclosures. What would you find? You’d still see many REO properties, but you’d certainly see a good amount of Short Sales too. 

Overall, in my experience as a Sacramento-area real estate appraiser it seems the market price tier goes: 1) Arms-length sale; 2) REO; 3) Short Sale. This is common sense really, but it’s another thing to prove that by crunching numbers, making trend graphs, and observing data in the marketplace. But there are certainly cases and stories and sub-markets that might show a different order for whatever reason - especially depending on the supply of housing inventory and particulars of a given property. Interestingly enough, sometimes there is little to no difference between non-distressed sales and REO sales. For example, what does it do to pricing differences when 90% of all sales in a market are either bank-owned or short sales? In a case like this, since the market is clearly saturated with distressed sales, it’s probably a safe bet to assume foreclosure-pricing is indeed the market and will set the pace for what buyers expect to pay for properties (see a previous post on Patterson having 96.5% of all sales as distressed). In a case like this, there may be no verifiable difference between REO and non-distressed sales.

Let me know if you have questions or insight. Comments are welcome.

www.SacramentoAppraisalBlog.com Is there a price difference between REO properties, short sales, and arms-length transactions?

We hear so many voices in today’s real estate market talk about the foreclosure rate decreasing in the Sacramento Region. Is that true? Are there less REO (bank-owned) sales today than there were two or three years ago? Let’s look at some hard numbers below for Sacramento County.

The information above is based on all residential sales listed in Sacramento Metrolist over the past two years. Overall, it’s true that there were less bank-owned sales in Sacramento County during the last 12 months in comparison to the year before that. The foreclosure rate decreased by 5% overall, but the interesting thing is that short sales increased by 7% during this same time period. What do you make of that? Have short sales simply replaced what would have been a similar rate of foreclosure for this year? As a home owner or real estate agent, have you found banks to be more receptive to working with you to do a short sale? Comments welcome.

www.SacramentoAppraisalBlog.com The Up and Down Dynamic of Foreclosures and Short Sales in Sacramento County

Trivia Question: How many zip codes are there in Sacramento County? (answer below)

I use the California HomeTownLocator website when looking for zip codes of particular cities. This site has been valuable for both business and personal use. I keep the link in my bookmarks since it is a quick reference to obtain zip codes for any city in California as well as search for other information such as census data and county details.

Case in point: Whenever I sign up with a new Asset Management Company for bank-owned properties in the Sacramento Region, they typically ask for a list of zip codes I cover. Instead of having to google each city I work in and find each individual zip code, I simply go to the Home Town Locator site and I get the information I need all in one place. Very convenient.

Triva Answer: There are 145 zip codes within Sacramento County.

This blog will host a “Lowest Priced House on MLS” category because it’s always interesting to answer the question, “should I buy this house or should I buy a car instead?” Yep, the prices are often that low.  

And the winner is…. $12,500.

620 E 4th Street, Stockton CA is for sale at $12,500. Per Tax Records, this property was built in 1936, has 1025 square feet of living area, 2 bedrooms, 1 bathroom, and a lot size of 3,920 square feet. So why is it priced so low? Well, it looks like it had a little fire damage to say the least.

It is a banked owned property and has been listed on the market for 142 days total with three separate Listing Agents. The property has been priced for only 21 days at $12,500 and appears to have generated a contract at least once (but back to Active status now). I’ll put you into contact with the Listing Agent if anyone is interested in forking out $12,500 greenbacks – it’s an all cash deal because of the condition (no, I don’t know the Agent).