A Distressed Property Study, by ME!

I have a new REO listing in a newer subdivision in Eugene. Part of my due diligence for the asset manager I was researching the neighborhood. What i found was quite disturbing and I thought I would share it with you.

86 Lots in the subdivision
In the last 9 months 8 homes (10%) have sold
Of those 8 homes, 4 (50%) were fair market
Of those 8 homes, 4 (50%) were short sales or REO

Currently there are 4 homes (5%) on the market
Of those 4 homes 3 (75%) are fair market
Of those 4 homes 1 (25%) are distressed.

With the subject and property next door coming on market it will change to:

6 active listings (7.5%)
3 will be fair market (50%)
3 will be distressed (50%)

For the 4 current active listings: average days on market is 117, average price per square foot is $136

For the 8 sold listings: average days on market is 192, average price per
square foot is $128

What this does not count are the homes which are currently delinquent.
Also, it shows that 50% of the homes currently on the market, or sold
in the last 9 months were distressed in some way, which is very high.

Of these 14 listings 2 were/are short sales. Their average price per square foot is $114.

Of the 14 listings 7 were/are fair market transactions. Their average price per square foot is $139

The remaining 5 were/are foreclosures and sold for $123 per square foot.

What I find the most disturbing is the following summary information:
Average price per square foot for FORECLOSURE properties: $123
Average price per square foot for FAIR MARKET properties: $139
Average price per square foot for SHORT SALE properties: $114

If you are wondering what this means, well, let me tell you. It means, as I have been saying, short sales are KILLING property values. The bank would rather (if it makes sense) take the short sale than foreclose because the costs to foreclose are so much higher. In addition, government programs are giving banks rebates (so to speak) for doing short sales. So if the bank can get all or some of the deficiency between the short sale pay off and the full balance, it works better for them.

So where is the problem? The problem is for the people next door to the short sale transaction. Their property value goes down an additional $9 per square foot based on the averages I presented above. For a home with 1,800 square feet, that means $16,200 in lost equity.