Homeowners Pay a Price for Neighbor's Foreclosure

Foreclosures Affect Home Values

When it comes to foreclosures, your neighbors could have a serious affect on your ability to sell or refinance your home.  Your credit score having virtually little or no affect on your ability to refinance your home.

Comparable sales or Comparables as defined by Wikipedia, are real estate appraisal terms referring to properties with characteristics that are similar to a subject property whose value is being sought. This can be accomplished either by a real estate agent who attempts to establish the value of a potential client's home or property through comparable market analysis or, by a licensed or certified appraiser, when performing a real estate appraisal.

A lender will require an appraisal when making a loan on a house or when you refinance.  An unusual amount of foreclosures in any given neighborhood can lower the value of the surrounding homes.

Appraiser often use the comparable sales approach for placing a value on residential property. They research home sales over the past six months to a year that are within one half mile of the property that they are appraising. Since foreclosures are not arms-length transactions, they do not represent the true value of properties in that neighborhood.  This becomes challenging for the appraiser or real estate agent to place a value on a property when there are no recent sales other than foreclosures in the immediate area.  They will then expand the search out from the home they are appraising and or go to a sold property farther back in time.  Most appraisers will use short sales as they feel short sales are arms-length transactions and that they represent the current market value.

Remember, Market Value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgably, prudently, and without compulsion.    

We are foreclosure and bank owned property experts in the Tampa Bay Area. Call us with a question or for advice....