It is really hard (impossible?) to compete with bank owned properties

Harrisonburg and Rockingham County have seen an increasing number of trustee sales (foreclosures) over the past few years....


click the image above for a larger version of the graph

The yellow bars above show the increasing number of trustee sales over the past decade, as compared to the number of sales recorded in the HRAR MLS (blue bars).  I am quite thankful that we have not seen as much of a surge of foreclosures as many other areas in Virginia and across the country, but the presence of these foreclosure and then bank owned properties has had a very real impact on homeowners trying to sell in the same neighborhoods as some of these foreclosed properties.

Let's take a look at an example to see the impact....

Stone Spring Village is a wonderful neighborhood of single family homes near the intersection of Port Republic Road and Peach Grove Road close to an elementary school, close to the new hospital, and close to JMU.  Most homes in the neighborhood are 3 to 4 bedroom homes, most are 1,500 to 2,500 square feet, and many have basements.  Until recently, home values in Stone Spring Village have been relatively stable.  But three foreclosures in the past year have made the Stone Spring Village market a bit more turbulent....

• Three homes sold in Stone Spring Village in 2008/2009 at an average of $134 per square foot.
• In 2010, however, the three bank owned (foreclosed) properties sold at an average of $113 per square foot. 
• One currently listed bank-owned property that is now under contract in Stone Spring Village is listed at only $89 per square foot!

Thankfully, there have been quite a few (five) traditional sales in 2010 that have sold at more typical prices, bringing the overall average in 2010 up to $131 per square foot.  The challenge, however, is having any chance at all of selling your house when you're competing with a nearby bank owned property. 

Which house would you choose if the following were available?

• a 2,000 SF home with 4 bedrooms and 2.5 bathrooms for $299,000
• a 2,000 SF home with 4 bedrooms and 2.5 bathrooms for $230,000 (bank owned)

Bottom line -- if you're living in a neighborhood where there have been several foreclosures in the past year (or so) it may be difficult to sell your home for much more than those bank owned properties....especially if there are currently available bank owned properties....and especially until there have been traditional sales to replace the bank owned comparable sales.