According to Florida Association of Realtor Media site, for September of 2009, sales in the Daytona Beach area were up by 43% and prices had fallen 18% compared to the previous year. This is median sales price.

I handle many bank owned properties and the banks want to know market trends, not just for their listings, but for the market in general. Research like this is more accurate than what you see on the news or on the internet regarding large trends. The difference is not only due to local markets not reflecting larger ones, but also because of how the data are collected, and which data are used.

The following is some research completed by Phil Hanner:

All data are from 08/23 to 11/23 of the year indicated 3 BR 2 BA homes, no pool, 1300 square feet living to 1900 square feet living. Year built 1980 to 2000. These data are based on mean, or average, sales price. This information tends to be more accurate because median sales price can be misleading. I would rather see a more specific type of property and see the average sale price over time.

Port Orange South of Dunlawton and East of I-95

Year average price change from previous year

2009 136,158 -24%

2008 178,686 -10%

2007 198,813

Port Orange North of Dunlawton and East of I-95

2009 143,556 -17%

2008 172,200 -7%

2007 184,545

Port Orange South of Dunlawton and West of I-95

2009 182,800 -25%

2008 243,300* +23%*

2007 197,375

*only 3 sales reported that fit the criteria so I don't trust this number

Area code 32128 3 to 4 BR, 2+ baths, no pool, same time period, no regard to square footage or age

2009 183,966 -22%

2008 237,612 -4%

2007 246,429

Let's cut to the chase.

Banks are not just motivated by price. I have researched this and lived it. I suggest agents look at the structure of REO deals and see what terms work best.

Some experienced agents have told me that buying REO property or short sales isn't much different than "traditional" real estate. Bull.

If you look at all the sales of single family homes in the MLS on beachside south of the Dunlawton Bridge you will find something interesting. This area includes Ponce Inlet, Wilbur by the Sea, and some of Port Orange. Only 2 homes have sold for under $100,000 in the past 6 years. Both needed repairs. Both were REO. Both were sold this year by the same Realtor.

The most recent sale attracted 23 cash offers. According to the listing agent (disclosed after the sale) 5 offers were higher than the winning bid. Several were over $100K, and one offer was $110K. The sale price was $96,650. 12% below market value. (What is market value? How much somebody with money is willing to pay - in this case 110K)

Terms got the deal. Knowing what the bank looks for can save a buyer thousands. I have seen banks pick an offer 15 grand less than another offer over a very minor issue. And, this was on a house in the 120K range.

I suggest if you are looking to buy a bank owned property or a short sale - work with somebody has listed AND sold plenty of them. Many agents out there just don't get it.

Short sales and REO can be 20 times the work of a regular listing and most people aren't willing to work that hard. One of my brokers held a course on short sales and was amazed that most Realtors in attendance said it was way too much work for them and they absolutely would not do it. Think a short sale is hard? Try an REO!

An experienced REO agent knows what will work and what won't. They also have a better idea of values in a given market because they are constantly required to do research. We are in a dynamic market and you need somebody who knows where they are going and how to get there.

Don't get me wrong. There are some awesome buyer's agents out there that have never listed an REO or a short sale and can get it done.

There are also agents out there that refuse to listen when the listing agents practically puts the deal in their lap. Their buyer's offer will not get accepted and they move on. A few days later a better (not higher) offer comes in. The day after the sale price is published in MLS, they see that it sold for $10K less than what their buyer offered, and then call me and accuse me of not submitting their offer. If an REO agent tries to help you structure your deal, you need to listen.

Thanks for your time,

Phil Hanner

Experienced REO Agent

Concord Real Estate Inc.

ps - I could not get the font to go smaller.

The following is an excerpt from a presentation I made the other day before a Real Estate Investment Group.

WHAT IS SELLING AND HOW IS IT FINANCED?

I looked at "bread and butter" homes in an average priced area including South Daytona and Daytona Beach between 92 (International Speedway) and Beville Road. Area 25/32 (South Daytona and Daytona Beach Beville to ISB). Last 3 months under 100K - chose this because it is often the investor's market. It shows that REOs are over 1/2 of the market. This is important because when searching for what is selling in the MLS, you cannot always tell if it is a short sale, or an REO, or owner occupied.

OWNERSHIP

REO 22 55%

SHORT SALE 8 20%

OWNER OCCUPIED 10 25%

HOW FINANCED

CASH 20 50%

CONV 8 20%

FHA/VA 12 30%

COMPARISON YEAR TO YEAR USING MEAN (average) 2008 - 2009

Area 25/32 (South Daytona and Daytona Beach Beville to ISB)

SFR 3/2 YB 1970-1989

Last year = $165,394 107 DOM

This year = $121,081 86 DOM

27% decline year to year on average - median reported @ 22%

TOTAL MARKET

2827 Single Family Residential ACTIVE on MLS

447 coded as foreclosure related

115 coded as REO (does this make sense?)

SOLD

1283 Total

380 coded as REO

98 coded as SS

478 foreclosure related

30% of sales are not coded as REO but ARE REO. This means as much as 60% of sales are REO.

25% of properties are actually foreclosure related but are not coded as such.

I saw data from the President of the Orlando Board of Realtors that states at lease 46% of sales in that market were REO and may be much higher.

MEDIAN SALES PRICE VERSUS AVERAGE PRICE

Why does this matter? Because almost every gov't report, news report, and even many industry reports refer to the median sales price. This has very little to do with VALUES. The median is just the middle - not the average price for any given market or type of property. The difference between median and mean (average) in the above market over the past year was 5%. The median price change was -22%. The mean price change was -27%. Median can actually be meaningless.

Median - middle - as many above as below

Mode - the most

Mean - average - best to compare a certain area, type, and time

For example - let's say that the following 7 similar homes sold in the same area in the past 90 days. Yes the spread is exaggerated to make a point.

21K, 22K, 24K, 31K, 160K, 180K, 188K

The MEDIAN is 31K. The AVERAGE is 89K. Is the median meaningful? Keep this in mind when hearing or reading market data. A large number of sales at the top or bottom of a market will make the data less important.

THE FUTURE

We are averaging 175 new foreclosure cases per week in this county. Translates to 9100 cases per year but not all will be foreclosed on. I don't see REOs going away any time soon. Our prices are currently at 2003 levels in the middle of the market.

As you can see - cash is sustaining the market. This explains why supply is down, sales are increasing, and prices are falling. People with money are still afraid to lend it to people without money, but they are not afraid to buy. The rich will need to feel comfortable with the market before they will lend again.

Landlords are buying cheap and undercutting the competition's rents. Landlords that bought in recent years cannot compete and are walking away and being foreclosed on.

The gov't continues to stumble around in the dark and has done relatively little to increase lending. Fannie and Freddie over lent in the past and created the bubble. Barney Frank actually said the other day that he was going to start forcing banks to lend again. Proof that gov't and moderation are mutually exclusive.

Most people have the bulk of their wealth in their home. We give away billions of our own money to help people buy a band new shiny Toyota and send the profits overseas. We destroy usable and fixable used cars so the middle and lower income people can't buy them. We fill the hog trough with trillions in front of special interest groups. We vote for people who are currently passing laws that will triple heating/cooling costs of homes, reducing purchasing power, demand, and values. Yet, RELATIVELY nothing to assist people maintain their wealth at home and allow them to regain some of what they have lost.

Things will improve slowly. But only if real change happens in our gov't and our lending institutions. It is still a good time to buy, but we have a ways to go before appreciation beats inflation.

Incompetence

I have an REO listing. The BPO came in low compared to the last sale price. The seller - wisely - wanted to get a second opinion. Unfortunately the agent they picked to do it worked for a company 35 miles away. This property is in the oldest section of town, ranch on a typical small lot, and needs about $30K in repairs. This includes a roof, a kitchen, an a/c system, and many other things. The neighborhood has no conformity.

The BPO agent used comps an average of two miles away when there are plenty close by. He used homes on 1 and 2 acre lots, in a superior neighborhood of newer contemporary homes. The land value alone of these properties is higher than the as-is value of the subject.

My value is around 85K, his is close to 150K. The client priced it in between but it is WAY over market value.

The client will suffer additional losses due to extended marketing time in a declining market and due to holding costs.

I don't believe the agent did this on purpose.

Fraud?

I did a BPO on a 4/2 with tons of problems. A huge tree had fallen and punched a hole in the roof. The roof was shot already. There is mold, the ceiling is falling in, some of the ceiling in the living room is only 5' 9" high. A/C is shot, no trim in entire house, eves and exterior wood supports are rotten, etc. Lots of functional obsolescence in the layout.

My BPO came in at around 52K AS-IS. Another BPO was done by a competing REO broker - it came in at $140k ASS-IS. Considering this broker's experience, I cannot believe this was due to incompetence. By all appearances he did this to make it hard to sell, and to create doubt in my competence and honesty with the client.

I HAVE BEEN VINDICATED - the property languished on the market for 7 months. During that time it lost about 11% of its value. It sold last week for around $40K.

This supposed REO "expert" missed the mark by 250%. I would say, adjusted for depreciation, I was pretty darn close. The increased marketing time cosst the seller over $10K in depreciation and holding costs.

Behavior like this makes us all look bad.

Racist Comments

Be careful about placing listings on some social web sites. I posted a listing on facebook and some idiot posted a comment on the page and said the property was priced low becasue of some demographics that I won't go into - but it was disgusting. The internet and apparently our industry is full of some unkind and selfish people. Doubt I will post properties there again - but you CAN delete comments.

I got a good laugh this morning. Checking out a listing in a high end subdivision. The listing brokerage has specialized in high end listings for many years. Guess sales are getting lean.

Out of NOWHERE, their web site claims they are "The area's only brokerage specializing in REO properties." They have fewer total listings than we have REOs. We have 120 REOs and 39 in the pre-list and they have about 6 total listings and only about 2 are REO.

Is this fake it 'til you make it or just flat out lying?

Anybody else out there seeing all these "specialists" and "experts" popping up?

If they are experts, I am Supreme Commander of the REO Universe :-)

Buyers beware. Sellers beware.

Having fun in Florida.

Phil Hanner

www.daytonabeachreo.com