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Elizabeth Weintraub

Foreclosures in Your Neighborhood May Affect Your Home's Value

By August 26, 2009

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If a home across the street from you has gone through foreclosure, it's likely that the foreclosure affects home values, not only on your street but throughout the neighborhood.

The magnitude or ripple effect of the distressed sale depends on where you live and the trend for your area. Take Elk Grove, for example. This is a suburb of Sacramento that once enjoyed the reputation of being the fastest growing city in the United States. But today, there are a lot of homes in default in Elk Grove.

A client asked me to do a comparative market analysis of her home. There have been no sales in that subdivision over the past six months except for a foreclosure, which makes that sale the only comparable sale. Now, appraisers can pull comps outside of that subdivision and adjust for value, but the likelihood is that foreclosure is going to affect this client's home price . . . read more about how Foreclosures Affect Value.

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At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

Comments

August 27, 2009 at 4:36 pm
(1) Tony Cartman says:

Even if there’s good properties around mine with high prices? Just because of the fact that it has a foreclosure sign in front of them is a problem for me?

August 27, 2009 at 4:41 pm
(2) homebuying says:

The problem with the home across the street is it may become a comparable sale. Generally, an appraiser will use 3 comps closest to the subject property and similar in size, condition and configuration. If you have very few homes that have sold, the appraiser may have no choice but to use that home as a comparable sale.

August 30, 2009 at 2:39 pm
(3) Tom Murtagh says:

I read that the real jobless rate is closer to 16 percent once you factor in underemployment and those who have stopped looking. Between homes being underwater and people losing their jobs, plus the end of the moratorium posed by the gov’t. Plenty of foreclosures.

September 4, 2009 at 12:07 am
(4) Wes Brown says:

I just had a very frustrating experience with a buyer that wanted to buy a short sale. One property they put a bid in on went into foreclosure even though there were bids. In the end they gave up and bought a foreclosure. I will not be recommending any one pursue a short sale property. It takes too long and often you lose out in the end.

September 15, 2009 at 12:07 pm
(5) Jeff Ragan says:

With all the foreclosures in my neighborhood, my property values has sunk over $25,000. It’s not over yet, I believe the housing market will still tumble more before it gets better. We’re looking at a decade or more before it is good.

September 15, 2009 at 12:13 pm
(6) Elizabeth Weintraub says:

I feel your pain, Jeff. You know, in some areas of Sacramento, property values have fallen more than 50% since 2005. Imagine how you’d feel if you paid $500,000 for a home that today may not sell for more than $200,000.

September 17, 2009 at 9:31 am
(7) Jeff Ragan says:

Elizabeth;

I cannot imagine that kind of pain. 50% decline in property values!! Ouch!!

I live in Michigan where we have the highest unemployment in the nation, my city of Flint has a very high crime rate per capita and no promising future in sight.

My wife and I have thought about leaving the state like many others, but there are no buyers here so we sit tight.

You write some nice articles, thanks for your insights.

Jeff

September 17, 2009 at 9:36 am
(8) Elizabeth Weintraub says:

Hi Jeff: Well, I watched Roger & Me and went to Flint shortly after that, just to see it for myself. I’m sorry for what has happened in that town. I had hoped the economic climate would have improved over the years. My best to you.

January 1, 2011 at 1:49 am
(9) Freda H. says:

I just learned that the house next to me is in forclosure and I am devastated. My house cost $327,500 four years ago and the house next door is selling for $239.00. That will affect the appraised value of our home. We are stuck in our home until the market gets better. We wouldn’t dare sell now and take a loss. It is truly unfair for the people who are paying their mortgages on time. However, I sympathize with those who can’t pay theirs but it sure impacts the neighborhood with a loss in home value.

January 1, 2011 at 11:04 am
(10) Elizabeth Weintraub says:

If the house is next door is the only foreclosure in the neighborhood, it might not dramatically affect your value, but on the other hand, if you aren’t planning on selling soon, then it might not matter. One sale does not a downward trend make.

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