How Low Can My Offer Be on an REO Property?

Bank owned real estate in Park City, UT is a very small portion of our inventory. In fact, of the 1048 homes and condominiums listed across the Park City Multiple Listing Service in the greater Park City area, only 16 are currently listed as being bank owned. There are 46 homes and condominiums listed as Short Sales, but those are different from bank REO properties.

To date this year 137 sales of bank owned condominiums and single family homes are shown across the Park City MLS. This number makes up over 15% of Park City sales (yet active bank REO listings make up less than 2%). As you look at the number of sales and active listings, it is easy to see that the turn-over of bank REO property in Park City is very fast.

The fast sale of bank owned real estate is by design. Property on a bank’s asset sheet is not a good thing and thus the banks price property to move quickly. That is not to say that they will give property away. Remember that banks are publicly held and at the end of the day banks are accountable to their shareholders; giving away assets is not viewed positively by the owners. As a rule of thumb, the bank REO properties are offered at a price considered to be 20-30% below market value. Due to this pricing strategy it is not uncommon to see multiple offers bid the price up above the asking price.

A recent article in HousingWire.com shows that Freddie Mae sold over 80,000 properties in the first 3 quarters of 2011 and that the sales prices averaged 94% of the asking price.

So when it comes time to make an offer on a bank owned property in Park City, UT, keep these things in mind and also keep in mind that the strength of your offer is measured by the speed at which you can close the transaction (think no contingencies) as well as the offer price. There are many players in the REO market searching for a deal in Park City; the relatively low number of REO offerings makes this market very competitive.

If you would like a list of current distressed properties in the Park City, UT area contact the YouInParkCity.com Group of real estate professionals at (888)968-4672.

With 45 days left before the end of the year, we probably won’t see significant changes in Park City real estate sales totals.

Current for sale inventory in Park City’s Lower Deer Valley area includes 28 single family homes and 54 condominiums. This number will likely rise slightly as we move closer to the ski season.

To date there have been 7 single family home sales this year and 2 other homes have accepted sales contracts. So the inventory levels indicate a 3-4 year supply of single family homes in the Lower Deer Valley area. The inventory varies greatly with offerings ranging from $775k to just over $3M. Lower Deer Valley has some homes that are beginning to show their age; this fact can be seen in the variations of asking price with the least expensive homes in the low $200’s/square foot and the highest end well into the mid $500’s/sq.ft. Single Family homes sales for Lower Deer Valley are likely to lag 2010 numbers by nearly 30%.

Condominium sales in the Lower Deer Valley area of Park City show a strong increase versus 2010, but there are factors that have skewed this number dramatically. To date 49 condominiums have sold in Lower Deer Valley and another 6 have pending sales contracts. With 53 active for sale condominium listings, the current inventory represents just over a one-year supply. Lower Deer Valley condominium sales totaled 32 for 2010, so this year’s numbers at first blush are very strong. The twist is that 22 of the sales were bank (or corporate) REO properties. The sales of the bank owned condominiums had an average sales price in the low $300’s per square foot. By contrast, the average sales price for non-bank owned properties was over $375 per square foot.

Many of the homes and condominiums in the Lower Deer Valley area were built from the early 1980’s through the mid 1990’s and many of the properties are “showing their age”. The new construction in the past few years in the Empire Canyon area of Deer Valley has impacted sales greatly as buyers tend toward more “turnkey” products. The Lower Deer Valley area offers great access to all Park City has to offer and there are definitely gems to be found in the for sale listings. For information regarding specific realty listings in Lower Deer Valley, contact YouInParkCity.com at (888)968-4672.

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The Western Mountain Resort Alliance is composed of 13 destination ski resort area Boards of REALTORS®. The alliance was founded on the idea that while the resorts vary geographically, they share many of the same real estate and development issues due to their vacation resort status. The alliance publishes quarterly sales statistics for the various destination ski areas.

While we here in Park City, UT believe that our resort community offers some of the best recreational opportunities and easiest access of any Western North American Ski Resort, a look at what can be purchased in other resort towns can be very informative.

VS.

Having spent 10 years in Vail, CO, I am jaded to believe that it is the resort with most in common to Park City. In terms of total available inventory if we exclude vacant land, the two areas are almost identical although the single family homes versus condominiums is reversed with Park City having nearly double the number of single family homes on the market as Vail. The number of units sold in the two towns shows Park City’s sales being up 18% in unit volume for the first three quarters of 2011 while Vail’s sales were relatively flat. Available inventory is down in both Park City and Vail versus 2010. The average sales price in Park City saw a 10% decline while Vail registered a 25% decline versus the same period last year.

Another interesting comparison stat between Park City and Vail is the median sales prices. Park City area single family home sales saw a median price (half above and half below) of nearly $550K while Vail shows $400K. Conversely, condominium sales median pricing shows Vail at $480K and Park City at $325. Average sales prices for both single family homes and condominiums are considerably higher in Vail than in Park City.

Maybe Park City and Vail don’t have as much in common as I thought in terms of real estate and the associated values. This likely has a lot to do with the differences in terms of Park City having been an old mining town that developed ski resorts versus Vail having been a ski resort that developed into a town.

For in-depth neighborhood by neighborhood real estate information about Park City, UT, contact a realty professional with the YouInParkCity.com Group at (888)968-4672.

Here is a new program designed to insure the value of the home you are buying. Equity Lock Solutions is offering a product called Home Price Protection.

Generally the plan works like this: The buyer or seller of a home or condominium in Park City can purchase a plan of up to $2 million for a one time fee of 1.8-3.0% of the plan amount (costs vary slightly but Keller Williams agents have access to the lowest rates). The plan is tied to a local House Price Index published by the Federal Housing Finance Agency (FHFA). The index for the Park City area is tied to the Salt Lake City metropolitan statistical area. If the index drops from the time of purchase to the time of sale, the plan pays the percentage difference in the fall to the owner at the time of the sale.

If you as a buyer purchased this price protection and bought a $1 million Park City home and five years from now when you go to sell the home the House Price Index has gone down 10%, the Home Price Protection Plan will pay you $100,000 when you sell the house. The plan is a hedge against the housing market going down, not the individual home, so choosing the correct home is still important.

For more in-depth information about this program as well as the current HPI for your area, go to: http://equityocksolutions.com/faq/ .

The NAR (National Association of Realtors) has picked Home Price Protection as their product of the year.

This may give a buyer the peace of mind they are searching for as they wonder if they are truly buying at the bottom of the market.

For more information about Home Price Protection or any Park City or Deer Valley, UT real estate questions contact a realty professional with the YouInParkCity.com Group of Keller Williams Park City Real Estate at (888)968-4672 or email us at info@YouInParkCity.com.