Your Neighbors Foreclosure is YOUR Problem!

We are hearing about the many foreclosures affecting American homeownership but I have found that many sellers do not fully understand how they affect them individually.  They may feel sorry for their neighbors who have lost their homes but they do not realize that their neighbor's loss is theirs as well.

When a home enters into foreclosure the bank prefers to unload it quickly.  They do not have the resources to hold onto the home and rent it until the market returns and they have little interest in holding onto it to get the highest possible price.  Additionally, many homes that reach the point of foreclosure have been neglected due to the homeowner's lack of resources to make necessary repairs.  Some homeowners are simply frustrated and angry and take as much as they can before leaving the home which sometimes includes fixtures such as toilets and water heaters.  As a result, the home is sold for significantly less than "market value".

Let's say that you have three neighbors who have recently lost their home in foreclosure.  You have seen the effects of the market but you still have some equity in your home and you have maintained it well so you anticipate that your values are going to be much higher than the recent foreclosure sales.  After having it listed for awhile you locate a buyer who is willing to purchase your home for the price that you have set because the buyer also sees the value of your home.  This is where things can become sticky.  The buyer, who has a solid 20% down payment on your home, orders the appraisal and it comes in $10K less than the accepted offer because the most recent comparable properties in your area include the foreclosures.  As an agent, I am seeing this happen over and over in our market.  Some banks are requiring multiple appraisals before they will finance your home while others are leaning heavily on the side of caution and using appraisers who will appraise on the lower end of the price spectrum. 

What can you do to help the economy and devastating effects of foreclosure?  Encourage anyone that you may know to pursue a short sale rather than allowing their home to go into foreclosure.  Most banks would prefer to sell the home for less than what is owed if they see imminent risk of foreclosure.  This allows the homeowner to sell their home for much closer to market value while also saving them from the long term repercussions of a foreclosure.  Call me to discuss your situation or have your friends call to speak in more detail about what can be done to avoid foreclosure.