We all probably know somebody who knows somebody that has gone through a foreclosure on their home. Their problem may also become yours. Lets say, for example you have been paying on your house for a number of years and would now like to have the mortgage insurance removed from your note. This is done when the value of your home exceeds 80% of the amount owed. The bank will employ a Broker to perform a Broker Price Opinion (BPO) This will give the bank an idea as to the value of your home. A year ago, your home may have been worth $80,000 with a $100,000 balance. Since then, however, three homes in your subdivision have sold at discounted prices due to foreclosure. This will affect your loan/value ratio.
A BPO is figured using comparative recent sales. If the foreclosed homes sold for $70,000, then that is the figure the broker or appraiser must use for 'comps'
Even though they were foreclosures, they are recent sales, and are a factor in reporting sale prices. The broker or appraiser cannot project a value on your home of, say, $90,000 if there is no data to back it up. As a result, recent sales indicate $70,000 which is short of the required value for removal of mortgage insurance.
If you are selling your home, your Realtor will suggest a list price that will attract buyers. This figure is determined, in part, by recently sold 'comps' If you are too high, then your home will not be shown. If there are still foreclosed homes on the market, their often discounted prices may steer buyers away from your house. Remember, not all foreclosures are in need of repairs, and many are in great condition.
If you have a sales contract on your home, one of the steps to closing is the appraisal. Residential property appraisals are generally based on two approaches:
The cost approach, which is the value to build the home, plus the value of the land,
and the market value approach. This type of appraisal compares the subject property to.... guess what? Three recent home sales in the neighborhood. If the appraisal on your home is low, then adjustments must be made, or the buyer must come up with more cash.
Kemah Oaks is not, fortunately, 'REO driven,' in other words, the majority of homes sold were not foreclosures. Hopefully this will continue and we will not see our home values affected by others misfortunes.
If you are thinking about selling, call us for a free and realistic evaluation of your home. 281.851.7095
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