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Foreclosures…Bad for sellers!


Foreclosures have been a hot item on the market for buyers and investors. They allow the purchaser to save a ton of money on a home purchase, since the homes are being sold well under market value. However, they are not so hot for someone who is considering selling or even refinancing.

Foreclosures are actually bringing down the market value for surrounding homes that are not under stress. How you ask? Anytime you purchase a home you have to have the value of the home appraised, to make sure it is worth what you are selling it for.   During the appraisal process the home will be compared to other homes in the area and what they are priced at. Well the bad thing about that now, is that the majority of houses in a given neighborhood are being foreclosed or sold through a short sale at tremendously discounted prices.

An appraiser is aware of the swarm of foreclosures on the market, and will often try to go futher back in the archives to see what homes were selling for before the market was flooded with foreclosures. This still doesn’t insure the seller will get top dollar for their home.

If you are in the position to refinance, you may be in a hard spot with that as well. In a normal market you would be able to refinance and be able to get top dollar, but now it’s a bit more work than that. It’s the same process as if you were trying to obtain a loan.

Sellers, who simply “want” to sell, are finding it to be more difficult to get what they think the house is worth. In some cases, the homes are falling out of escrow because they are not appraising. This causes the seller to have to reconsider the listing price, being forced to drop it even more, to meet market value.

Experts will agree that foreclosures are really no good for the economy in general. Especially for the neighborhoods who have extremely HIGH foreclosure rates. They don’t really allow much room for a “normal” sale to take place. Foreclosures have definitely become bad news for these sellers. Other experts believe that a large amount of foreclosures brings down the overall face value of the neighborhood. In some cases people will just leave the home before they even go into default, and many believe that this can raise the crime rates in the said neighborhoods. This also causes for neighborhoods to look more run down, since there is no longer anyone living in the home to maintain the property. Yards become a mess and the home begins to look like a shack. This has happened in the best of neighborhoods, and the worst of neighborhoods.

My only advice to the sellers who feel like they are surrounded by foreclosures and low priced homes, would be to sit tight (unless you have to suddenly relocate) and don’t sell until the market turns around in your favor. This will help you to get the highest price on your home. After all, equity doesn’t stop building, just some food for thought.

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