Tale of 3 Markets

As 2010 wraps up it’s abundantly clear that the Georgia real estate market is basically a tale of 3 markets. What I mean by this is that the market is segmented into 3 categories or types of homes.

Foreclosure Homes – Bank Owned, REO, HUD homes

This category is at the bottom.  These homes are the homes that the banks or investors have foreclosed on and put back on the market.  Typically these homes have the lowest price and are in the worst condition. Understanding that the characteristics that define “Foreclosures” is directly related to their selling strategy and overall condition of the home, rather than technical definition.  Although, the groupings and scenarios of these homes are clearly different, the buyers and the market has made it such that this has become a sub-market of the larger market.  It’s extremely rare in the Atlanta Real Estate market to have a “bank owned” home leap up to compete directly with a Resale or Short Sale.

This category of home typically offers a no-nonsense approach to negotiations but it’s the “seller’s” way or no-way. There’s a good deal of competition for homes in this category between investors and traditional buyers alike.  In addition, there are stiff penalties for not closing on time and quick turn times if the transaction “ball” is dropped.

Resale Homes (and New Construction)

This is the top of the market.  These homes are characterized by having the best condition of the homes around.  Typically these homes are occupied and well cared for.  They also represent homes that are by and large the most expensive or highest priced home in any given market.  They have clear advantages of being able to be flexible and close quickly.  Most sellers in this category do understand the market and would love to be more flexible but simply cannot financially.  This means that other items not normally associated with real estate negotiations are now subject for discussion, such as furniture or deferred maintenance type repair request.

In addition, this category represents new construction.  Due to the small inventory of homes relative to the overall market, new homes most clearly competes with resales. It’s important to note that the incentives are still high to purchase new construction but so are the costs.  In most Atlanta Markets, the cost of a new home construction will exceed the cost of a comparable resale.

Short Sales

Homes in this category are obviously in varied situations resulting from being “under water.”  Not all owners are facing foreclosure and some may not even be facing a true hardship.  Likewise, there are sellers in this category in great distress.  This creates a wide variety of homes in various stages of conditions.  The constant is the selling price often falls between that of a foreclosure or severely distressed property and that of a resale.  Hence, 3 markets.

Typical transactions often last around 3 months with some lasting 6 months or more.  In addition, there’s a great divide between those that understand the processes and those that don’t requiring a short sale specialist to help.

Each market offers unique opportunities and challenges, however, as you look at the real estate landscape, it’s pretty clearly defined as 3 markets.