What kind of discounts are feasible in US real estate right now?

Discussion in 'Economics' started by Ghost of Cutten, Jan 17, 2010.

  1. This is for anyone who has some actual real estate experience - in the current state of the market, especially rather bombed out areas like Vegas, Miami, Detroit etc, what kind of discounts to comps would a patient buyer be likely to achieve? E.g. buying from foreclosure with cash offers ready to close quickly. Also, if anyone has an idea of current prices relative to replacement costs, rental yields on mid-tier properties, and other valuation measures, I'd be happy to hear the details.
  2. First off, I'm a Realtor in Northern California and have done many REO and short sale transactions both from the buy side and from the listing side.

    With both of these transactions, but especially with the REO, the bank has a major concern and that is that once an offer has been accepted it actually closes. When an REO falls out of escrow the bank looks upon it as an expense. Being a cash buyer will give you an advantage because the bank knows you'll be able to close. In many cases this will give your offer an edge, within reason. I get offers all the time from Jackass's. Guess what, they hit the trash can.

    The rest of your question gets a bit tricky and there are too many variable to address in a forum like this. I've seen 35 & 40 cents on the dollar with properties that were once over a million dollars but other areas maybe only 80 cents on the dollar.

    My advise, and you may not like it, is to get in contact with a Realtor and let them work for you. You'll get much better information than you'd ever get in a forum on ET.
  3. hayman


    A new wave of foreclosures will hit the nation between Q1 and Q2 this year, as many ARM's get reset. This will undoubtedly have a negative effect on housing prices nationwide. Keep this mind, as you look to purchase.
  4. drobin


    I'm a R.E. agent and R.E. investor in Boston, MA. The typical investor formula when seeking to buy any property is not to pay more than 70 to 75 cents on the dollar of the after repaired value, minus any repair costs. Again this is the typical formula used by many small investors and with all cash offers because "cash is king". Keep in mind that some investors are comfortable outside that range.

    I've also used and still do use emerging market research to gain an edge on investors because many won't do the market research.

    Here are a couple of links:
    1. http://www.builderonline.com/local-...-does-your-market-rank.aspx?cid=BLDR100115003

    2. http://www.uli.org/~/media/Document...gingTrends/Americas/2010/2010EmergTrends.ashx

    Hope this helps. Good Luck.
  5. jnorty


    how do you make money paying 75 cents on the $? i've bought 8 properties threwout the country the past 12 months and won't even look if its not 30-40 cents on the $ from the bubble highs.many places in the north just didn't correct enough to get me interested. i'm finding huge bidding for low balled reo's and short sales the last few months but its also knocking the values down again in some areas. what scares me know is when the 80% or so of the mkt wakes up( those who have been paying there mortgages on time) and wants to move in the next few years and sees there home is worth 30-40% less than the highs and many times less than there mortgages. how do they react? does this continue the wave of foreclosures and prices to even lower levels?
  6. drobin


    A very wise and very wealthy R.E. investor once told me that stocks and bonds can and sometimes do go down to zero, but real estate never goes down to zero.
  7. The morons at the Fed have protected the northeast. If banks were allowed to fail in the northeast, then it would show that the pillar of the northeast - the New York Fed - was in serious trouble and therefore the US was in trouble. Have a look at the failed bank list on the FDIC web site http://www.fdic.gov/bank/individual/failed/banklist.html Note how many banks in the northeast have failed! Do you REALLY think it is because arrogant asshole bankers in the northeast are MUCH smarter than bankers in other parts of the country? Is it because the northeast was not REALLY overinflated in home prices? Is unemployment really low in the northeast? Nope - the banks are protected in the northeast. This is relevant because if banks in the northeast were smacked down and had to push REO out the door, then prices in the northeast would drop like a rock and more banks would be in trouble...the New York Fed would be shown to be the crap hole it is.

  8. sumfuka


    :D So true, us northeasterners live in a bubble within a bubble.
  9. drobin


    Just some food for thought, most if not all of the Forbes 400 own real estate or rights in real estate which helps their bottom line networth. Banks, foreign/domestic investors favor hard assets aka "real estate" the one investment no matter what culture, language or religon everyone understands has value.

    I was once told that real estate is designed to make you wealthy over time, not overnight. Many counties, towns and cities are named after people woh owned large amounts of land (real estate) who retained their wealth or some portion of it with real estate when other investments failed.
    #10     Jan 17, 2010