MiamiRealEstateKing

There are 3 types of sellers these days. Which one is the top performer?

In real estate on February 16, 2011 at 11:13 am

These days, there are 3 types of sellers under two major categories: Distressed Sellers and Non-Distressed Sellers.

The first major category are the Distressed Sellers which include two distinctly different types of sellers. One, is all lenders dumping acquired inventory assets (well…these are really a liability to them that are not producing for them), via foreclosure auction. These are what are known as REO property or Real Estate Owned (once bought back at auction by the lender).

The second type of Distressed Seller is John and Jane Distressed Seller who for whatever reason, may now be facing foreclosure and are only able to get out from under this cloud by selling during the pre-foreclosure stage via the Short Sale process.

The second major category of seller is the Non-Distressed seller. This does not mean that if they were to sell at true market value (today’s true market value), they wouldn’t be selling for less than they owe and be considered Distressed Sellers like John and Jane above. These sellers are often fishing to find a buyer though many times, you also find reasonable sellers in this category looking to get what they can today.

The type of buyer that overpays and buys one of these non-distressed properties are mostly those looking to completely avoid the hassles of buying distressed properties and are cash buyers with a long-term outlook to owning these.

January, 2011 saw drops in New Listings, Total Available Inventory and Closed REO Sales from December, 2010. However, every category mentioned before is sharply up from January, 2010 and comparing Q1/2009 to Q1/2010 as demonstrated by the chart below.

Short Sales have performed quite differently, signaling that lenders are STILL not looking to help homeowners by helping streamline the short sale process. Although Short Sales typically sell for more, maintain a more stable market by keeping families in their home (rather than creating vacancies), cost less in legal fees, help family and neighborhood morale, have a potential for increased goodwill towards the institution for helping rather than foreclosing, help current owners become more responsible owners again in as little as 2-3 years when they’re able to buy again rather than 7-10 years or more because of the foreclosure mark in their credit and other factors, neither the government nor institutions do enough still to encourage short sales over foreclosures. This sentiment is reflected in the numbers seen below.

In spite of the above, we can see a surge of 37.6% in Pending Short Sales from December, 2010 to January, 2011. Year-over-Year and Q2Q however, the numbers are not as impressive as those in the REO category.

The biggest underperformer among the 3 seller types are the Non-Distressed Sellers, as seen below.

Incredibly, this category has the largest inventory of available properties for sale among all seller types in the MLS (Multiple Listing Service) and yet, the lowest performance of Pending and Closed Sales. The chances of sellers in this category to move from the “I wish to sell” list to the “I Sold” list are almost like the chances of winning the lottery and a reflection of the disconnect between these sellers and today’s reality – even after 3+ years of this!

In short, Buyers ARE SMART and have online access to information that makes them smart. Also, professionals in the business are able to provide them the same data sellers see during the Listing Presentation. Somehow, they both (buyers and sellers), see and hear a different message whereby, sellers still ‘think; things aren’t as bad as the agent is showing them and buyers appear convinced that there are (and are actively pursuing), those deals ‘on sale’.

After all, why pay retail when you can buy wholesale?!

Sellers who do not need to sell and refuse to understand this, must be prepared to have their property just sit on the market for a long time.

Months of Inventory based on Closed Sales tell a very telling story when it comes to which market is performing. This is a measure of how long it is taking a property to go from Listing to Closed in months. Below, is the Months of Inventory based on Closed Sales for each as follows:

Non-Distressed Sellers

Short Sales (pre-foreclosures)

REO (lender owned / foreclosed)

While it takes about 2-months to list and close an REO, about 18-months to list and close a Short Sale (mostly because the process is not yet streamlined), it is taking about 2 years to list and close non-distressed property according to January, 2011’s numbers.

Thus the phrase “BUYER’S MARKET” – in which we’re clearly, still in it.

Disclaimer: All charts are created from reports published February 2011, based on data available at the end of January 2011. This representation is based in whole or in part on data supplied by Realtor Association of Greater Miami and the Beaches, Realtor Association of Miami-Dade County, Realtor Association of Greater Fort Lauderdale and Northwestern Dade Association of Realtors. Neither the Board or its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Board or its MLS may not reflect all real estate activity in the market.

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