The new buyer profile today is understandably looking for a ‘good deal’.   With the major changes we’ve seen in Orange County in the last 2 years, the buyers that feel ready to jump into the market are consistently saying, ‘If I find a good deal…’

So what is a ‘good deal’?  Let’s examine the potential opportunities.  There are 3 types of listings that are predominately found in the active market today:

1. Short Sales
2. Bank Owned (or REO’s)
3. Traditional Sellers

Short Sales: A short sale is a listing in which the seller currently owes more than the home is worth in today’s market.  I have discussed the process of a short sale in other locations on this blog.  Do your homework here if you are interested in this type of purchase.  It is a process that will take time and not every short sale will actual sell.  Some seller’s don’t have a legitimate hardship (required for a bank to approve their short sale).  Some will go into foreclosure after weeks of tying up a buyer(s) hoping to buy that home.

Is this a good deal?  Maybe.  Remember, they are usually priced very low to attract offers.  A bank won’t even consider a seller’s hardship until they have an offer.  This may mean that the home is priced far below what the bank may ultimately take.  And if the home is in disrepair, you’ll need to add the cost of repairs into your calculation.  A short sale will take time, patience, and a little luck.  I have seen some ‘good deals’ here but you’ll need to go into the process with ‘eyes wide open’.

Watch for rising interest rates in the meantime.  This can impact your affordability.  Also, watch the market.  What may seem like a ‘good deal’ now, may not seem so great in 4 months when the short sale has been approved if the neighborhood values continue to decline.

Bank Owned or REO’s: This is generally some of the most aggressively priced inventory on the market in Orange and Riverside Counties.  The banks don’t want to carry the inventory and they are priced to move.   The decline in prices have reached a level that has become affordable again for the first time buyer and appealing to the investors.

Steven Thomas, President of Re/Max Real Estate Services recently said in his Market Time Report, “For those looking to find a great “deal” by offering to purchase a property far below the asking price of a distressed home, good luck.  Your chances are much greater in winning the California lottery….The sales to list price ratio, how close a home is sold compared to the asking price, is between 99% and 100% depending upon the price range.“  He continues to make the point that the way that they are priced is already a deal.

After recently working with a buyer on the purchase of a single family home, we consistently found ourselves in multiple offers on bank owned homes – and not just 2 or 3 offers.  Often times there were 10 + offers in place within 48 hours of listing.  Who was awarded the purchase of those homes?  Cash is king here my friends.  Those with cash down, few contingencies, solid credit, and a strong offering price came away with the home.

Traditional Sellers: Some parts of the market are moving more slowly than others.  The bulk of the distress sales, 93% according to Steven Thomas, are under the $750,00 price point and subsequently there is a great deal of pressure on prices in those lower price points.

Are there good deals with traditional sellers?  The short answer – Yes!  Most people that are listing their homes today understand that it is clearly a buyers’ market in Orange County.  They generally know that it won’t be easy and those that are motivated to sell, are pricing their homes to compete with the inventory.  And often times that inventory consists of short sales and banked owned homes, especially in the price points under $750,000.

The bonus on many of these, there still is pride of ownership.  Is a bank owned home still a good buy if there is $50,000 in cosmetic or structural repairs?  Maybe, but maybe not.

The Bottom Line: Seriously consider the potential for a great value from a realistic, traditional seller.  You’ll have the benefit of full disclosure from the seller (which you don’t have in bank owned homes), you’ll have the opportunity to request repairs, you won’t be competing with the buyers that are focused on – “I want to buy a foreclosure’, and you won’t be dealing with the unknowns and long waits of the short sale process.

If you find the great deal you’ve dreamt about in a short sale or bank owned, by all means, go for it.   But be an educated buyer and understand the process and expenses when determining if you really have a good deal!