Bank-owned property now dominates the multifamily market so thoroughly that only distressed and obligated sellers can put their homes up for sale.
In 2009, 32 percent of all two- and three-family homes sold in Massachusetts have been bank-owned (REO) property, according to The Warren Group, publisher of Banker & Tradesman.
With nearly one third of the market represented by houses that are being liquidated by lenders, property prices have plummeted, and that has seriously hurt sellers searching for something resembling fair market value.
“We’ve got some fire sale pricing out there right now,” said Don McMeniman, sales manager for ERA Morrison in Lowell. “If you have to sell, and you’ve purchased in the last five years, you’re going to be in trouble.”
The median sales price for the 2,296 two-family homes sold in 2009 is $188,157. But if the 645 REO properties are removed, the median sales price jumps to $263,000. That’s because the median for two-family REO property is $100,000.
This has led to sellers who can wait to stay away from the market entirely, or Realtors having to tell clients their houses just aren’t worth what they had hoped.
“We certainly give them the facts,” said Michael DiMella, managing partner of Charlesgate Realty in Boston. “If a place is surrounded by bank-owned properties that have sold at distress prices, those are the comps for their home and they have to live with that if they decide to sell. That’s why in the area, some of the inventories are down.”
Two Kinds Of Transactions
For some people, however, waiting is not an option, and then they’re often stuck negotiating with the bank. There is no way to track short sales, but they have become a major part of the multi-family market, as REOs strip surrounding homes of their value.
“The market in this area, particularly in Lawrence … it’s split into two types [of transactions],” said Michael Santana, a broker at Star Real Estate Co. in Lawrence. “It’s short sales and it’s bank owned. Short sales are taking up to 90 days to more than 12 months to get to closing because of all the technicalities involved. Buyers are jumping around from Realtor to Realtor trying to find a quick closing, and it’s just not going to happen. It’s creating a demand.”
Santana said everyone is waiting for lenders to “open the floodgate” of foreclosed properties that were promised in January and February, and that would stimulate the market and bring prices back up, if only a little.
“There are buyers out there,” said Santana. “The first-time buyer programs are packed, and we’re talking weekly.”
Buyers Looking Cheap
Those first-time homebuyers smell blood in the water, however, and they’re looking only for the deals, according to James Boenis, broker and owner of Century 21 Sager Real Estate in Lowell.
Boenis said long-time family homes with two and three units, in Lowell’s nicer neighborhoods, can’t compete with the cheap goods flooding the market. Boenis pointed to one property where an elderly family member of the seller lived for 60 years that now sits vacant. They had a buyer in place, with an agreement for $262,000, but the appraiser couldn’t come back with comparables, and the deal fell through.
“They weren’t going to dump that into a $210,000 two-family,” he said. “It was worth a hell of a lot more than that. The house is now vacant, they want to sell it, and they don’t want to carry it though the winter. The point will come where they are just going to have to sell it for what the market will bear for them.”
The problem, Boenis said, is nobody knows when the market will recover.
“I can’t predict the future, but if you can sell and get something you think is reasonable, then sell,” he said. “I don’t know what two or three years will bear whatsoever.”
