IRVINE, CA—Some of the biggest discounts on homes for sale are in the Midwest, Oklahoma and New York, according to a report from RealtyTrac. The firm says the states with the biggest available discounts are Illinois, Missouri, Oklahoma, New York and Wisconsin.
“Nationwide and in most states, we found the types of homes selling at the biggest discount were those that were in the earlier stages of foreclosure, were vacant and had negative equity,” says Daren Blomquist, VP of RealtyTrac. “One notable exception to the negative-equity market was homes in default with positive equity, which sold at the second-biggest discount nationwide. The top five property profiles with the biggest discounts nationwide all sold at average discounts of 25% or more.”
The RealtyTrac analysis looked at 24 discrete property profiles based on the four variables and what average discount—or premium—each of those profiles sold for in the 12 months ending in March. The discount or premium was calculated based on the average percentage that properties in each profile sold below or above their estimated full market value, and then comparing that percentage to a control group: all single-family homes not in foreclosure that sold during the same time period. The 24 different profiles were analyzed for discount or premium for all US properties and also for each state separately, with the profiles with the biggest discounts varying from state to state.
“In a competitive real estate market with still-low inventory and multiple offers the norm, it’s more important than ever for buyers and sellers to identify properties that offer the best possibility for a discount and those that are the most likely to sell at a premium,” says Blomquist. “A data-centric evaluation of potential purchases is important for both buyers and sellers to help counterbalance the emotions that often emerge during a typical real estate transaction. Those emotions can range from frenzy to fatigue—both of which can result in poor decisions.”
As GlobeSt.com reported earlier this week, investors are challenged to achieve the rental returns of the past due to ever-increasing home prices, says Blomquist. In a recent 370-county analysis, the firm found that investors buying US residential rental property in the second quarter of 2014 are getting an average annual return of 9.97%, down from an average annual return of 10.6% a year ago.