Foreclosures vs. Your Home Price

Yes, it's hard.  It seems, now that we're coming out of the Eye of the Foreclosure Storm, that you see them everywhere.  You see domain names such as cheapproperties.com or stealahome.org.  The media sends a flurry of information down our televisions, computers, radios, and smartphones telling us that we're in for another wave.

Through all of this mess - has anybody told you how that affects YOU as a homeowner?

Unfortunately, there are two ways that a foreclosure or short sale can impact your home price.

1.  Distressed Properties impact the appraisal of your home
If there is a low amount of distressed properties in  your area, it is likely that your property value will be minimally impacted.  In fact, some experts say you may have appreciation due to this phenomenon.  By definition, a "low amount" would be anywhere between 10%-15%.  Once the foreclosure or short sale market hits more than about 30% of your market area, it is safe to say that these become the new "norm."  Buyers will look at all prices around you, and make decisions based on the "bang for their buck" ideal.

2.  They are discounted competition directly next to you
Of the five negotiable parts of a contract, price is, perhaps, the biggest component.  Every consumer, whether it be a home or a grocery item, wants the best deal.  According to RealtyTrac, foreclosures (on average) sell for a 41% discount and short sales for a 19% discount.  Though most people think these "distressed properties" are trashed and gutted, at sizable discounts they turn out to be more appealing than a normal sale.  Every buyer purchasing a distressed property is one less buyer for normal sales - and less demand in the market with an oversupply of homes means lower prices for you.

If you're a buyer, the field is all yours.  As a seller, it will be important to discuss with your real estate professional your financial bottom line.  This not only paints a bigger picture for you, but also helps guide you through a tough market to list a home in.