Buying a foreclosed home can be a terrific way to get a “deal”. Foreclosed homes typically sell at steep discounts as compared to comparable homes not in foreclosure.
In its latest quarterly report, foreclosure-tracker RealtyTrac shows the states in which foreclosed homes are most deeply discounted.
For real estate investors and first-time buyers, RealtyTrac’s data is especially useful.
Foreclosures : 1 In 5 Home Sales Nationwide
Foreclosure-related home sales accounted for 19% of home resales between July-September 2012, according to RealtyTrac’s latest quarterly report. This represents roughly no change from the quarter prior.
There were 193,000 homes sold in some stage of foreclosure last quarter.
The three stages of foreclosures are Notice of Default, Scheduled Auction, and Bank Repossessions. The former two are known as “pre-foreclosure”. The latter is the actual foreclosure event. In Q3 2012, for the first time since five years, the number of homes sold in pre-foreclosure outnumbered those sold by banks.
The average price of a pre-foreclosure home was 27 percent lower than a non-foreclosure residential property last quarter. These homes required an average of 359 days to sell after beginning the foreclosure process.
Bank-owned homes, by contrast, sold for an average 38% discount over non-foreclosure homes and required 186 days to sell, on average, after the original date of foreclosure.
Connecticut Leads Foreclosure Discounts
Foreclosure discounts — like most things in real estate — are a local phenomenon. Depending on where you live, or where you buy, your discount for buying a distressed home will vary.
Last quarter, the eastern seaboard was the best place to get a foreclosed-home discount. Of the top 10 states in terms of foreclosure discounts, six were located on the East Coast, north of Virginia.
Last quarter’s Top 10 states for foreclosure discounts were :
- Connecticut : 46.97% discount over non-foreclosed hoe
- Massachusetts : 46.50% discount over non-foreclosed home
- Ohio : 45.16% discount over non-foreclosed home
- Illinois : 42.90% discount over non-foreclosed home
- Georgia : 42.38% discount over non-foreclosed home
- Maryland : 42.20% discount over non-foreclosed home
- Rhode Island : 42.02% discount over non-foreclosed home
- New Jersey : 41.06% discount over non-foreclosed home
- Kentucky : 40.55% discount over non-foreclosed home
- District of Columbia : 40.16% discount over non-foreclosed home
Interestingly, however, of the three states in which foreclosure sales were most prevalent, none appeared on the “biggest discount list”.
In those three states — Georgia, California, and Arizona — foreclosure sales accounted for 38%, 36% and 34% of all home resales in Q3 2012.
Buying Foreclosures? Get Pre-Approved.
For buyers of foreclosed homes, it’s helpful to have a mortgage pre-approval before making a bid. The foreclosure purchase process can move quickly at times, and it’s often good to know you’ll be approved for the home for which you’re bidding.
This is as true for first-time home buyers using the 3.5% downpayment program via an FHA mortgage as it is for real estate investors planning to use the 5-10 Properties Program. Properties in foreclosure and pre-foreclosure require quick action.
Get started with a mortgage rate quote online.