MARKET & TRENDS: DISTRESSED PROPERTIES
down from an average of 58% a year ago. Buyers foreclosure-auction-purchased at a similar 59% of estimated after-repair value (or 41% below after-repair value) on average in the third quarter, down from an average of 62% a year ago.
DISTRESSED PROPERTY PRICING: PERCENT OF AFTER-REPAIR VALUE
FORECLOSURE AUCTIONS
BANK-OWNED (REO) AUCTIONS
80%
70%
60%
ADDING VALUE WITH RENOVATION
50%
40%
The low purchase prices on distressed properties typically come with high renovation costs. By definition, these properties need significant rehab to be brought back into fully repaired condition. “It was destroyed. The holes in the walls. It was messy,” said Barone of her most recent Auction.com purchase. After substantial renovation, she was able
30%
20%
10%
0%
SOURCE: AUCTION.COM
to return the property to financeable condition so it could be available to a broader pool of owner-occupant buyers. “I was so happy because the appraisal came back $10,000 more than what I was asking for. [The new buyer] is going to start with $10,000 in equity.” The favorable distressed property pricing represents potential wealth-building opportunities, not only for investors like Barone, but also for the owner- occupant buyers she sells to and for the owner-occupant clients she helps purchase distressed properties directly. Barone recounted the story of one client who purchased a distressed property to live in seven years ago and still lives there. “You have to see what she did with that house,” said Barone, noting the client and her husband did most of the work themselves.
10 | think realty magazine :: january – february 2024
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