How do I compete with a foreclosure two doors down?

Asked by Eric S., Laveen, AZ Thu Jan 17, 2008

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Anna Goodman, , Phoenix, AZ
Thu Jan 17, 2008
Unfortunately as soon as that property closes, foreclosure or not it will be a comp in your neighborhood. The only way to compete is to stay competitively priced and make sure your property is in top condition. Hopefully buyers will see the value of a clean, move in ready home over a bank owned property and buy yours instead of the one down the street. I would caution though, that although your property may be in better shape than the foreclosure, in this market buyers seem unwilling to pay more for it. It seems buyers are really focused on price. They will choose the lowest price home in the best condition. Good Luck.
2 votes
Kelli Michel…, , Scottsdale, AZ
Fri Jan 18, 2008
I am a short sale/pre foreclosure expert in Phoenix. The market is still in correction. If you are comparing homes in the re-sale market to those in pre-foreclosure, many appraisers are not taking the short sale -low sales prices into deep consideration. Now, the reality behind it is that you must have a SUPER product to compete with the discounted, short sales but BANK OWNED and PRE FORECLOSURE sales are tedious and very hard for some agents to close. The buyer should research teh TIME it could take to close. For sellers, time is of the essence. They must price competitive with short sales esp with the BEST location, condition and prices. Some short sales take so long to get approval that they are deferred in maintenance by 6-8 mos, utilities are off and you never know what you'll find when they are on!!
Appraisals are conservative by nature now, we need to know that the marketplace is going to correct a lot more with SHORT SALES and PRE-FORECLOSURE because many skilled agents can negotiate with banks. The bottom line is that your house if in a GREAT location at a great price in the BEST condition possible for sale has a shot. NOT EVERYONE WANTS TO WAIT 6-8 MONTHS TO "MAYBE" BUY A HOUSE!! A short sale is very much that way!
WATCH trends and listen carefully to educated people in the real estate industry. I am optimistic that we will see a healthy market within the next couple years. WILL WE SEE 2005 again soon?? Doubtful!
1 vote
Don Tepper, Agent, Burke, VA
Thu Jan 17, 2008
Some good comments here, Patti's in particular, but I think many of the others miss the point of the question. Eric's right: If there's a foreclosure two doors down, and they're similar units, both in the MLS, then that's competition. And, as with any other situation, you have to stand out from the competition.


Price: You may not be able to price yourself lower than a foreclosure, but--on the other hand--I've seen foreclosures come on the market that were no bargains...even leaving aside their condition. So don't automatically assume that the price point for the foreclosure will be so much lower than yours. I've seen situations in which a property bought at the peak of the market for, say, $600,000, comes back on the market for $500,000. Ugh. However, a neighbor may have bought 6-7 years ago for $250,000. Meanwhile, prices have fallen in the neighborhood from the peak of $600,000 to around $525,000. Ugh, again. The neighbor may wince at putting his property on the market for $525,000--or slightly lower to compete with the foreclosure. But he's still coming out ahead and he's generally competitive with the foreclosure. I'm amused at all the postings on Trulia of people who are looking for foreclosures, presumably because those are "bargains." Not all of them are.

So, getting past price, consider condition. That's already been raised, but it's valid to mention it again. Some foreclosures are in poor shape because the former owners trashed the place. Even when that's not the case, I've seen many foreclosures that ended up that way because people bought fixer-uppers near the top of the market, began gutting the place, started rehabbing, then ran out of money. Meanwhile, the market tanked. So the foreclosure has no kitchen or baths. Now, not all foreclosures are like that. Some are in pretty good shape. Still, they're vacant, they've been winterized, they have that vacant, empty feel. You go in and they smell slightly stale. With the heat off, or turned down, they're chilly. You compete with that by making your home comfortable and inviting. Consider having it staged. Take care of the outside, too. Many buyers, even those who claim to be interested in foreclosures, have little imagination about how a place can look. That's the value of stagers. Make sure your place looks great.

Then, make it easy for someone to buy. When a lender is involved--either with a short sale or a REO, it can get long and complicated. Promote your property--have your Realtor promote it--as easy to buy, quick decision, no complicated decision process. Remember: That's not competing on price; that's competing on ease of purchase. That's appealing to everyone, but especially to people who might have been advised (correctly) to sell their old house before buying a new one. They're operating under time pressure. And that works in your favor, both because you can close quickly and because they may be willing to pay more for the assurance of a successful close. That will definitely give you an advantage over your competition.

And make sure your Realtor is aggressively marketing your property. Just a personal observation, but most foreclosures aren't marketed that well; they rely on the "magic" word "foreclosure." A lot of people aren't looking for foreclosures. Sell the strengths of your house. Bring in buyers who aren't looking for foreclosures. Maybe (depending on the strengths of your property) they're looking for a large lot...or a new kitchen...or lots of storage space.

The one thing a foreclosure may have going for it is price. You've got a lot of other cards in your deck.

Hope that helps.
1 vote
Patti Pereyra, , Chicago, IL
Thu Jan 17, 2008
I have to respectfully disagree with Gail. Comparing a foreclosed property to your own is not comparing apples to oranges when the property is right next door.

Just because the property is foreclosed does not automatically mean that it is in poor condition.

I can't tell you how many attempted flips that are beautifully rehabbed or even new construction we have in Chicago that are in preforeclosure or bank-owned. There are several high rises where unit owners not in foreclosure are feeling that downward pressure on pricing because of the foreclosed units in the very same building. In these cases, it's not apples to oranges -- it's just plain unfortunate.

Eric, in answer to your question - you can't compete. Unless the home that has been foreclosed is in sad shape and there is a reason why your home should be priced much higher, buyers, as Anna astutely pointed out, are focusing on numbers big-time. This is when you will have to acknowledge rather than try to throw a blanket over the "bargain" next door. Use the negatives to your advantage: "It was a bank-owned sale, in really bad shape, tons of work needed, was sold as-is, with no disclosures. But mine? Well... "

Good luck!
1 vote
Gail Hiebert, , KCMO
Thu Jan 17, 2008
Hello Eric. I'm tempted to ask why do you feel you need to compete with properties that are different from yours? The truth of the matter is that there are certain buyers for foreclosed homes (most of them go back to the bank, in case you didn't know -with the Bank on the title) and there are buyers for new homes, and still other buyers for pre-owned homes, mobile homes, trailers, and land. There are specific buyers for each type of property, so competition is never about one type to another. If I'm a consumer looking for a new house, no pre-owned home will please me, and vice-versa. You compete against similar properties in your area. Take a look at your area, drive around and see which homes are most similar, then get a clue, usually through an agent, about the values of those homes and how they compare with your home. Then you have a basis for improvement. Don't make yourself unhappy by comparing oranges to apples. It's a different tree. Take action to find out how you can improve your marketing skills, and a realtor is a very big help in this regard. Hope this helps. Good Luck
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1 vote
Get-smart, , Durham, NC
Sun Apr 26, 2009
I agree with Bill, you have to actively market your house and have the best price in the condition other houses are in. What is your agent doing to market your house and are they lowering your price to drive more traffic?
0 votes
Bill Eckler, Agent, Venice, FL
Sun Mar 1, 2009
This is a question that too many Americans are asking themselves today.

The reality is that the foreclosure and short sale markets are creating the "New Market" and will be shaping the face o future real estate activity.

We feel the key to contending with the current market trends is to accept what is and deal with what you have to. You do not need to beat or match their asking price but you MUST remain competitive with them and seek every opportunty to make your property stand out "head and shoulders" above theirs.

Better curb appeal, superior marketing plan, staged interior, a warranty etc. may be factors the will swing the buyer in your direction.

It is important to "keep it real" by understanding your price doesn't need to match theirs but it needs to be in the same ballpark.

Good luck
0 votes
Andrew and M…, Agent, Glendale, AZ
Sun Mar 1, 2009
If you currently have a property in Laveen and don not absolutely have to sell, Don't!, regardless of what is the perception you are in competition with the short sales and Foreclosures which pague the area, the recient listing and sold comps are going to influence the value of your home be it distressed or not.

If you have to move i may suggest renting for the next few years.
0 votes
Benjamin Bai…, Agent, Anthem, AZ
Thu Mar 13, 2008
My best advice is that, if you don't absolutely have to sell right now, don't. If you can hang on until some of this short sale inventory is sold, then wait a bit. Selling homes on the market is a bit like a boat that is taking on water: If everyone runs to one end of the boat, it will certainly begin to take on water more quickly and/or sink. If you want to compete, then be competitive, but if you can't compete right now, then wait. Hope that helps.

Ben Bailey
Windermere West Valley
0 votes
Joe Bourland, Agent, Avondale, AZ
Thu Feb 14, 2008
As stated below, price is not the only factor in selling a home. Your price needs to be within a striking distance to the other home. But weigh the other factors in your favor: easy of closing, not selling "as is", included seller property disclosure statement, better condition, no need to put money into the house, etc.

Focus on the value, not the price.
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Mr.P, , Arizona
Thu Jan 17, 2008
Hey Eric,

As far as condition of foreclosures go, some are beautiful, some are crack houses.

You really are not competing with a single foreclosure. Right now there are 463 single family homes for sale in Laveen. That is not even taking into consideration the spec/new builds.

Those short sales are wreaking havoc also.

The bottom line is that foreclosure is going to set a price point in your neighborhood.
Either you beat their deal price wise now, or your future buyer will have a tough time with the loan, because of the appraisal from the selling price of that and all the other Foreclosures.

Good Luck
0 votes
David Baker, Agent, Phoenix, AZ
Thu Jan 17, 2008
Hello Fellow Laveenite,
It is indeed a tough situation when one has to compete with a foreclosure and probably even more when it reverts back to the bank and becomes a lender owned property for sale. On a positive note, I have had calls from appraissers that have mentioned they will look into the sale, and give consideration if property was sold under duress. So, if you can market the property well, get traffic through the home, and ultimately get the offer, you could still see a succesfull transaction above the price of the foreclosed home. I do agree with previous answer in which buyers are focusing a lot on price. Yet, often enough foreclosed on homes are not in the best of condition. So price your home accordingly and good luck.
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