So everything is going swimmingly in your world – job is working out, bills are paid on time and the mortgage is manageable. The whole Foreclosure vs. Short Sale debate is nothing for you to be concerned about, so why bother yourself with the details of this issue, right?
Whether or not this issue is happening to you, almost everyone knows someone – a friend, family member or neighbor, who is struggling to make ends meet and considering their options. In the Real Estate industry, this type of situation is known as a Distressed Property – a homeowner under water on the mortgage and considering listing their home as a Short Sale or letting the property go altogether as a Foreclosure. The bottom line – a Foreclosure does not have to be happening under your roof to affect the value of your home, the perceived value of your neighborhood or the mix of neighbors you share it with.
Knowledge is power,
and it pays to understand how Distressed Property sales can affect the value of your biggest investment, your home.
- Appraisers can and do consider the sales of Distressed Properties in the valuation of your home for refinance (for yourself) or a new mortgage (for the buyer of your home if you sell.)
- Numerous Foreclosures within the same property (such as condos or town homes) or within the same neighborhood can weaken the Home Owner’s Association; Struggling homeowners are unlikely to keep up with HOA fees, and not all associations are able to afford the steps necessary to collect on unpaid fees.
- Foreclosures – particularly multiple Foreclosures within the same neighborhood – can weaken home prices. This downturn in prices can be due to changing appraisal values as Distressed Properties sell for lower values, but the situation can be due even more to buyer perceptions in a neighborhood with Foreclosures. Un-mowed lawns, weeds, peeling paint – none of these characteristics boost a home’s curb appeal, and multiple homes in a state of disrepair can drag other homes in the neighborhood down as well.
You can’t control whether your neighbors choose to head down the road to Foreclosure, but you can arm yourself with good advice to share if your friends & acquaintances mention mortgage struggles. A Short Sale is always a better long term strategy for a struggling home owner than Foreclosure: better for the family, better for the neighborhood and better for personal credit ratings in the long run. Encourage anyone in this situation to consult a licensed Realtor. A good professional will listen without judgement and offer sound recommendations based on the market and their unique situation.
Happy to be at your service,