One-third of single family home sales in King County last year were sales of distressed properties, while one-half of single family home sales in Snohomish and Pierce Counties were distressed, according to a new report from Bellevue-based Washington Property Solutions .
Distressed sales include both foreclosed homes that have been put up for sale by the lender and short sales through which houses are sold for less than the amount the seller owes on the property.
Distressed sales peaked in Q1 2011 in King County, when 36 percent of single family home sales were distressed. Distressed sales in Pierce County also peaked in the first quarter at 52 percent of sales, while sales in Snohomish County in Q1 and Q4 were flat at 49 percent.
Seattle and the Eastside experienced fewer distressed sales in the fourth quarter of 2011, at 27 percent and 23 percent, respectively, of single family homes sales.
The Bellevue firm, whose staff are licensed Windermere Real Estate brokers, used data culled from the Northwest Multiple Listing Service in preparing the report.
Looking ahead, the sheer number of bank-owned properties is likely to feed an increase in short sales as foreclosure sales further erode property values, said Washington Properties Solutions CEO Richard Eastern.
The median price paid for a single family home in King County in a short sale was $286,000, while the median price for bank-owned properties was $202,000. Part of the reason bank-owned homes sell for so much less is that banks tend to keep to a strict timetable, with price reductions between 5 percent and 10 percent every three or so weeks, Eastern said.
However, Eastern said, “There’s a myth out there that you will be able to sell a short sale significantly below market value.”
Actually, “there is a bit of a check-and-balance process,” Eastern said, with lenders typically basing their valuation on three active listings and three closed sales in the surrounding neighborhood. One challenge he sees is that banks do not take the listing history into account in evaluating offers on a distressed property. Eastern recently had a deal fall apart on a property that originally listed for $200,000 before dropping to $190,000. The only offer on the home in four months was for $163,000, which the lender rejected as too low, even though it was the only offer made, he said.
JEANNE LANG JONES covers commercial real estate for the Puget Sound Business Journal. Phone: 206-876-5426 | Email: firstname.lastname@example.org Click here to sign up for the PSBJ Daily Update.