Last November I wrote this post regarding foreclosures, seeking to help answer the question, “What percentage of the list price should you offer on a foreclosure property?“
I noted that for the last 42,000 single family homes sold in Maricopa County through late 2008, the average accepted offer prices was 95% of the list price, at the time of the accepted offer. Inferring from this that on average, you could probably feel comfortable offering somewhere between 90% and 95% of the list price, if you thought the list price was in the ballpark of a fair price.
Today, I thought I’d dive a little deeper into the numbers, and look a bit more closely at just homes sold in Phoenix, rather than all of Maricopa County, checking what price they get listed at, what price generates an offer, and how close to the asking price the final offering price is.
To bring the data closer to today, I’ve limited my sample set to bank owned homes (foreclosures) sold within the last 6 months, and again only in the city of Phoenix, with a final sales price above $50,000. That search resulted in 3606 sold homes.
For these homes, look at the chart below:
| Original List Price | List Price at time of Sale | Closing Price | Days on Market | Price Change | % Price Change | |
| Average | $154,751 | $138,163 | $134,055 | 103 | $-29,324 | -18.31% |
| Median | $124,900 | $109,900 | $107,500 | 69 | $-22,100 | -16.04% |
| Low | $50,000 | $50,000 | $50,000 | 1 | $0 | 0% |
| High | $1,672,900 | $1,589,900 | $1,327,000 | 979 | $90,000 | -49.96% |
| # of listings | 3606 homes are included | 1801 homes changed price |
The first thing that jumps out at me, is the amount of price reduction that is happening on average. You can see that the average home was listed for $154,751, but sold for $134,055. And that it took 103 marketing days to achieve that price. In my experience, banks will seek a price for approximately 45 days, before lowering their price. At any given price, banks then want to get a sales price that is fairly close to their asking price. These average and median numbers bear that out, almost perfectly.
To yield the 18% price reduction from the initial offering price, the average property languishes on the market for ~90 days, during which it typically endures at least two price reductions. And then it finally hits a price that buyers like, and they make a good offer, within 3% of the asking price at that time, which the bank finally accepts, because they have failed to make a deal at a higher price.
As you can see from this table, if you don’t like the initial price a bank has the property listed for, you probably won’t succeed making what appears to the bank to be a “low ball” offer. They are likely to reject it, at least until the property has had a chance to attract an offer closer to what the bank initially wants. Further, the banks appear to be in no hurry to make a deal right away, rarely countering back with a price they would accept, for fear they will tip their hand. FYI, this is contrary to how deals tend to get made between private parties and can be counter-intuitive.
Rejection after rejection, my clients simply submit the same offer over and over again, never going up in price, until the bank decides they like the offer. Or until my client decides they like a different house. Or in some cases, until someone else decides they like the house a little more, and makes a better offer. When making offers on a foreclosed home, it’s difficult, but having a more mechanical, detracted stance, can make the process easier to endure (though still not easy).
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