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Monday, April 18, 2011

Dramatic differences when distressed sales removed

I track and report upon several local real estate markets. In general I report on all of the sales in each market, which obviously includes a big slug of distressed sales - foreclosures and short sales - these days. Potential customers often complain that they shouldn't be lumped in with those distressed sales when I'm evaluating a market price for their home. They are partially correct. The distressed sales do have an impact on the overall market by lowering everyone's value. But by how much and what is the difference between the two categories - total market and non-distressed only sales? I decided to review my data to see if I could see that difference.

I must admit that I was not prepared for the dramatic differences in some key metrics. In general the median non-distressed homes sold for $40,000 or more than the total market median price. The impact on the SEV multiplier is even more dramatic, rising between .35 to .5 depending upon the specific market. The difference in price per square foot is also dramatic, ranging between $16-26 per square foot for non-distressed homes. Below are some of the markets and the differences.

Milford Overall Market
Median Sold Price - $200,000
Average SEV Multiplier - 1.5316
Average Sold Price/Sq Ft - $80

Milford Non-Distressed
Median Sold Price - $240,000
Average SEV Multiplier - 1.8775
Average Sold  Price/Sq Ft -  $100

Highland Overall Market
Median Sold Price - $97,000
Average SEV Multiplier - 1.4881
Average Sold Price/Sq Ft - $72

Highland Non-Distressed
Median Solf Price - $235,500
Average SEV Multiplier - 2.0011
Average Sold Price/ Sq Ft - $102

White Lake Overall Market
Median Sold Price - $136,425
Average SEV Multiplier - 1.5937
Average Sold Price/Sq Ft - $75

White Lake Non-Distressed
Median Sold Price - $179,375
Average SEV Multiplier - 1.8624
Average Sold Price/Sq Ft - $87

Commerce Twp Total Market
Median Sold Price - $154,000
Average SEV Multiplier - 1.5943
Average Sold Price/Sq Ft - $80

Commerce Twp Non-Distressed
Median Sold Price - $225,000
Average SEV Multiplier - 2.0028
Average Sold Price/Sq Ft - $96

So there is a case to be made for keeping the two markets separated for purposes of advising would be sellers what their home might fetch on the market. In general sellers still want to start out too high, but not as bad as one might have thought. I looked at the Days on Market figures too and not unexpectedly the non-distressed homes are on the market longer, although that is a statistic that is so often gamed by the listing agents (keeping the listing "fresh" by re-listing rather than extending) that ii is not always a very accurate indicator.

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