Foreclosed homes sell for 30% less?

Question

Hey guys. I pretty recently got some education about wholesaling. When we were learning about coming up with an ARV and finding comparables, I was taught that foreclosed homes sell nationally for 30% less than what they would if they weren't foreclosed. Is this true? And if so, why is this the case?

Wayne Brooks · Answer

No.  If they sell for 30% less, it's because of the condition.  But, it does sound good if you're pitching some guru "education" to take advantage of it though.

Wayne Brooks · Answer

The ARV on a rehabbed house has nothing to do with if it was previously a foreclosure, short sale, whatever.  You and your realtor are simply valuing the property against the comps differently, for some reason.  Similar SF and close proximity doesn't mean a property is actually "comparable".

Brent Coombs · Answer

@James Popp, in some neighborhoods, .4 of a mile away may as well be in another State! Also, EVERY property is different. Have you driven by both of them, to do your own comparison? Never assume the ARV will be more than (or even as much as) your Realtor suggests. "The future is not ours to see"...

(To reference a previous poster, type @? and wait for all the responders names to appear below the Reply Box - you may have to scroll down. Then click on the relevant name - voila!). Cheers...

Account Closed · Answer

What is the source of that statistic?  Ask whomever trained you.

There's nothing wrong with asking some tough questions of your mentor and "drilling" down a little.  If they get belligerent with you when you do, demand your money back and get somebody else.

A good on-site mentor runs about $15,000.  When you pay that kind of money, you are entitled to ask questions without being belittled for asking them.

Brent Coombs · Answer

@James Popp, if they have already been bought (cheaply) because of foreclosure, THEN the rehab is done to ARV standard, and THEN they are listed again, they can be sold as NON-foreclosure properties. So when sold, they're not included in foreclosure sales statistics (other than: non-foreclosure properties tend to sell for 30% more)! That's my take on it. Sure, ask her about it...

James Popp · Answer

@Brent Coombs Ohhh okay, I get what you are saying. You are talking about initially buying from the bank, and I was talking about ARV. That's where the confusion was. So the problem still remains, why are my comps so much different between me and my realtor? Should I ask her about it?

Brent Coombs · Answer

@James Popp, that last point brings us back full circle - foreclosed properties sell for less on average, because on average they need a lot more work.

If yours is 50 years older, why wouldn't its ARV be less?

[NEVER trust "Zestimates", but you can refer to SOLD comps]...

James Popp · Answer

@Brent Coombs I had 4 comparable properties that I found, same bed and bath, similar square footage, all built around the same time, and close by. I actually got on google maps and looked at all the neighborhoods with street view, and they all pretty much match my target property, if not slightly nicer, but definitely not enough to cause the discrepancy. My realtor had 3 comps, but only 1 out of 3 is accurate in my mind. The other two have 2 bathrooms instead of 1, one of the two has 400 extra square feet, and the other one was built in 2006 when mine was built in 1956. So honestly, looking at mine, I think they are better. Also I looked at zillow, and it adjusted the ARV down because it also said that homes sell for less when they are foreclosed than they would in a traditional sale. So I'm not entirely sure what to think

James Popp · Answer

The property is also a foreclosure just an FYI

James Popp · Answer

So foreclosure has nothing to do with ARV then? Like I have a property right now asking 27,000. I found some really good comps that are all less than .4 miles away from the property, have all the same attributes, and based on these the ARV should be $113,000. But when I asked my realtor for comps she said it's only worth around 85-95k all fixed up? What can explain that discrepancy?

Also, unrelated, but how do you mention someone in a comment? Thanks!

Foreclosed homes sell for 30% less?

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