bank owned homeI recommend a couple of interesting new articles that combine to shoot down a lingering REO market myth: That HUD Homes, bank foreclosures or other REO property listings represent a major discount from more “conventional” real estate listings. They absolutely are a great value, though. Why? Because the real deal arrives with the benefits offered by those REO sellers.

After all, REO sellers are like any other seller looking to earn market value for their properties–especially in a scorching market like Sacramento. Any institution with a significant REO portfolio has two goals: 1) To protect the market for their assets, and 2) leverage their institutional advantages to help qualified buyers get into their listings.

HUD is a terrific example, for owner-occupant buyers in particular. HUD does an FHA appraisal upfront and lists the property at the FHA-appraised price. Additionally, they sometimes pay up to 3% of closing costs, plus escrow fee. You can read more about the extraordinary benefits of purchasing a HUD Home here.

The articles I mentioned illustrate this phenomenon in different ways. Ryan Lundquist’s always-useful Sacramento Appraisal Blog today investigates a sliver of the Sacramento marketplace over the last year; the price of REO sales has crept equal to and finally past the price of regular listings. When you read about investors backing out of the Sacramento market, this is a lot of the reason why. (Their all-cash purchases, combined with an inventory crunch, spurred a lot of the housing rebound we’ve seen over the last year to 18 months.)

But it’s not happening only in Sacramento. As noted over the weekend at the blog Real Estate Economy Watch, the so-called “foreclosure discount” is dropping precipitously:

The latest data, from the National Association of Realtors Realtor Confidence Index survey of 3,400-plus Realtors suggests that for REOs the discount has fallen to 16 percent average discount to market, while short sales are selling at a 13 percent average discount. For properties in average or better condition, the discount is now only 11 percent.

According to CoreLogic, when foreclosures and short sales are included with normal sales, home prices are now higher than they would be without distress sales. Excluding distressed sales, home prices increased on a year-over-year basis by 11 percent in June 2013 compared to June 2012. Including distressed sales, prices increased more, 11.9 percent.

We can learn a lot from the numbers, but for now, it’s worthwhile to focus on where the best values remain: In the tremendous benefits of HUD Homes and other select REO properties. Check out my current listings for a look at some of these properties in Sacramento, and ask me today how I can help you take advantage of these values as a buyer or seller.

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