RealtyTrac’s Phoenix Real Estate Numbers Don’t Add Up

This turned out to be an excellent way to get the blood pressure surging before bed:

From KTVK, our local Channel 3:

According to RealtyTrac, the foreclosures in Arizona are selling at a discounted rate of 25 percent less than other home sales.

As painful as that is for your home value in the short term, there is a long-term benefit.

Here we go again.

Let’s start with the first idea, that foreclosures are selling at a 25 percent discount to non-distressed sales. We can look at this anecdotally … put your home up for sale tomorrow, set the list price at 25 percent the average comps of foreclosed homes and let me know when it sells.

We’ll be waiting a while.

If you don’t have that kind of time, let’s look at the numbers from our old friend El Mirage. Why El Mirage? Because it’s a small city, which gives us a sample size that’s meaningful but also not totally unbearable.

(Editor’s note: I’m not thrilled with the methodology here, taking a median sales price for all types of properties en masse, but I can’t imagine RealtyTrac did anything even slightly more in depth than this.)

Since the start of the year there have been 399 closed sales in El Mirage. Average sales price – $65,435.

Of those 399 closed sales, 262 have been bank owned homes – the foreclosures that RealtyTrac is talking about. Average sales price – $65,170

That leaves 132 sales. Average sales price – $65,943. That’s $773 dollars, or just over 1 percent higher than the averages sales price of foreclosed homes.

Let’s go one step further and take out the short sales. That leaves us with 51 sales at an average sales price of $69,891 – just over 7 percent higher than the foreclosures.

Now … RealtyTrac was talking about the state of Arizona as a whole, or so the report said, and I’m looking at only one city. Look at Phoenix or Maricopa County as a whole, and the number are different – in face, the non-distressed sales are selling at multiples of two or three compared to distressed sales, driven by several multi-million dollar listings that are pulling up the averages to an extreme level.

So on a macro-level, RealtyTrac’s numbers appear to be accurate. But they also can be misleading to a potential home seller unwilling to face reality. Which brings to mind another adage …

There are lies, damn lies and statistics – Mark Twain

What is the point of all of this? First, to debunk the idea that a non-distressed home automatically will sell for more than its distressed cousins simply because it’s not a foreclosure. Comps are comps. End of story. Appraisers on purchases aren’t going to give a value significantly higher than surrounding sales only because a home isn’t distressed.

Before you ask … condition plays a role, but some bank owned homes are in decent condition. You can’t always assume they’re shredded.

Second point … the second sentence from the report also debunks the first.

As painful as that is for your home value in the short term, there is a long-term benefit.

If non-distressed sales really were selling at a 25 premium to foreclosures, then there shouldn’t be any impact on your home value. Right? Except there is. And we all know it. So does the reporter, even as he parrots the rather misleading, though likely correct, data from RealtyTrac.

Lastly …

For people trying to weather this economic storm, Blomquist recommends they take advantage of the low vacancy rate. Renting property could keep them afloat.

Matt Warfield points out, that if you are facing foreclosure try to at least short sell your home. If you are current with your payments, you can actually go out and buy a new home the next day. If you start missing payments or your home is foreclosed on… that could set you back for 3 to 7 years.

Ride out the storm to what end? It’s not like those of us who have watched out values drop by 30, 40, 50 percent are going to see those values again in the next several years. For most, the rental option isn’t a matter of riding it’s out the storm … it’s ignoring reality.

And on the second … when you face unexpected tax or legal ramifications because of your short sale or unable to purchase immediately, make sure your lawsuit names Matt Warfield as he’s the one providing you this legal advice.

Or you can be smart, ignore the marketing person, and talk to a real estate attorney. I’ve got names if you need them.

What you’ll learn, and what Mr. Warfield doesn’t apparently know, is a short sale is not the best option for everyone. In reality, in many cases, it’s a poor choice. A real estate attorney can help you determine what works best for you in your circumstances.

There is no blanket answer for everyone.

And yeah, I’m a little annoyed that the reporter for Channel 3 didn’t give that advice instead as that would have helped people more than “go for a short sale.”

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

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