As A Seller, Do Foreclosures Really Hurt My Home Value?
One of the first questions I get when talking about foreclosures is that people want to know if a foreclosure in their neighborhood will hurt the value of their home if they’re thinking of selling. My answer is that foreclosures affect all of us acrossAmericain the long run. But you’re worried about your particular property value as a whole and I understand that; however, there is no direct, correct answer to that. The value of your home may or may not decrease depending upon your actual neighborhood. Foreclosures will however, have an affect on selling your home. So if you’re thinking of putting your home on the market you want to be informed. Unfortunately foreclosures have been a part of the American landscape for a long, long, long time.
The key point is this; home sales are up 21% from 2010. While the price of homes hasn’t gone up the actual sales of homes is up and that’s a good sign for anyone selling.
The first thing to keep in mind is the appraisal of your home. Many people are worried that a foreclosure in the neighborhood will lower their own home’s appraisal value. Appraisals are the most important aspect to a seller, so this is a legitimate worry. Some people may think that they can sell to a cash buyer; but, you have to realize that most cash buyers are “investors” buying bank homes. So if you are hoping to sell to a cash buyer then you have to compete with the bank prices or cash prices the banks sell at. This means you have to usually be one of the lower-end homes, selling at a lesser value.
Most of the non-bank owned homes are sold with bank financing. Almost 90% of non-bank homes are sold with bank financing. So you have to consider the appraisal values and foreclosures because banks are starting to use these numbers in their appraisals. Plus, you probably already know this but the 30-year loan is still the leading loan that drives the market. You have to keep in mind that if you choose to sell your home in a foreclosure market you have to make sure your home will appraise well. This means doing all you can to get the highest return on your investment when making improvements.
Another thing to remember is that foreclosures tend to cause more foreclosures. This is called the “domino effect.” One home goes into foreclosure and when one person in the neighborhood hears that their neighbor went into a foreclosure they start to think, “Well maybe I should let my home go now too because I owe more than it’s worth.” This domino effect makes it harder to justify staying in an “upside down” home, where the value’s dropping and/or you owe more than your home is worth. They call this the “Broken Window Theory.”
The “Broken Window Theory” is just this: once a window is broken it can be the start of criminal behavior and property values dropping rapidly. Let’s face it; banks are not good home owners. They don’t keep up the yards, they don’t keep up the utilities, and the house that is foreclosed upon begins to deteriorate rapidly. Once that starts to happen the “Domino Effect” takes over and other homes follow suit.
The former mayor ofNew York City, Mayor Giuliani, transformed areas ofNew York Citywith this broken window theory. He focused on some of the areas where there were literally broken windows; dilapidated housing, and unkempt properties. By fixing these areas, slowly but surely the criminal action in these areas decreased dramatically, property values raised and neighborhoods took pride. So as you can see this is a very realistic theory that can go either way.
It’s all about “quality of life” that foreclosures can hurt your chances of selling a home at its highest value. When your neighborhood has increased criminal action and dilapidated properties, it lowers the quality of life. Once that quality of life is diminished the value of your home follows suit and your home’s value will generally decrease.
However, don’t allow all of this to frighten you. Your home value will not be affected that much considering ALL of the factors. If you are going to sell, just be aware of the facts. Homes are selling, just at ‘reasonable’ prices. Buyers will pay a little bit more for your home than they will for a bank owned home because your home will generally be in better condition than a bank owned home or short sale home. It’s all about the money. Just put yourself in the buyer’s shoes and be realistic.
So you’re probably wondering, “Why are you just giving me all of this information and not asking for anything back?” The reason is simple; we want to make sure that you get good, valuable information. We want to make sure that you get a good deal on your home, get a good deal when selling your home, and get a good deal when buying a home. If we get this information out into the marketplace, everybody wins. We all benefit from being informed.
But don’t forget, selling homes is our passion. We love what we do and it also helps us to pay our bills. So if you have any questions or need help in buying or selling a home we would love to help you. Give us a call or drop us an email
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