Profile picture for valerie52

If 2 houses are in foreclosure and sell?

If 2 houses on the same street go into foreclosure and the other 10 houses on the same street are not. How come the 2 foreclosures that are ransacked depleted of value effects those other 10 houses that are well maintained? Example 2 foreclosures sold for 200,000-225-000. The other 10 homes are 500,000 why do the 10 homes drop for comp purposes when people are looking to buy in the same area. A real estate agent said to this prospective buyer to offer as close to the foreclosures as possible?????????????????????????????
  • February 07 2009 - Seattle
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Answers (9)

it is not a loss until you sell. Sit on your mortgage and wait out the dips. Bretzke is right, we have to sell off the soft underbelly to reach the real values of a neighborhood.  The shortsales and foreclosure properties are going to be gone in a few months. Check the market in CA for comparisons today.
  • March 09 2009
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In short, the neighborhood is uglier with 2 ransacked homes.  All values fall when a neighborhood that had 12 pretty homes becomes one with 2 trash-heaps and 10 pretty homes.
  • February 25 2009
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Second part of post, as there is a limit on number of words, I found out after I wrote the answer in word  ;)

If the market price of houses in a neighborhood is $500k, and they lost 10% in the last year, the neighborhood is now at $450k.   The investor and the bank are now anticipating another potential decline of 10%, in the next year.   The finished market price in this neighbor hood will be $405k.  An investor builder wants to make between 15% and 30% profit on a project.  If the estimated sales price of the fixer is $405k, with $80k remodel and holding costs, $40 sales costs, the investor breaks even at a $285 purchase price.  Thus the profit is based upon how low the investor can purchase the house from the bank.  At $225 or $200, the profit margin is adequate.   A year from know, when the house is on the market, the price may be 10% higher, thus in the $450k range.  The neighborhood price starts to go up, and the cycle begins again. 

  • February 16 2009
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I think the current market consist of two types of homes.  The ones that are ready for move in by a new owner and the fixers.   The ready to move into properties do not even require cosmetic fixes.  The owner has cared for the property and prepared it for sale.   These properties have gone down in value, but they will sell, to owner occupied buyers with sizable down payments with loans obtained loans from conservative bankers.  

The fixer type of home is the bank owned property, or in various states of foreclosure, or the failed fixer upper.  Five years ago these were bought by small experienced investors who put sizable down payments and took substantial risk in the investment.   Over the past five years the price for the fixer has almost matched the ready to move into house price. The anticipation by everyone, including the banks, was that the price would go higher.  Now that the banks are no longer financing based upon potential 20% yearly increases in house prices, these fixer houses can only be purchased by the experienced and well capitalized investor.  

  • February 16 2009
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Valarie52,

I suppose a buyers agent can certainly tell there buyers to offer whatever they like, however you can decline the offer.

The most important factor it the homes that sell will have to appraise at the asking price, or a lender will not loan on it.  An appraiser will take into account many factors and, no the other homes in the neighborhood will not all be valued at the low price, however they will take a hit becuse of the foreclosed homes.

An good agent can give you a vrey good idea of the market value, howevr an appraiser will give you the best value and the good news it they will take into account the buyers accepted offer. They must be able to validate the area comparables to the homes market price.

Good luck,
Linda

  • February 16 2009
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Profile picture for Mr Caveat
because if they can get x for y they will not pay z. once the supply of foreclosures dissapears, the comps will have to be reflective of what real organic sales are in your area... not to say that this will happen in any specific timeframe or that organic sales wont take place at depressed levels, merely to say that comparable sales are made up of sales that occurred locally, recently... thats why!

and it saddens me to say i underestimated the seattle area's reletive streangth, though i dont think azrob is talking about me. The govt, boeing, msft, wamu, wells, sbux, and other huge employers weakness has softened the fundamentals of the area substantially in the last 6 months, we have recently passed the national average for unemployment.
  • February 07 2009
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glad it wasn't you! Phoenix is far ahead, the denial is ending and despair is beggining. My home has lost half its value since the peak. it is now down to 2004 value, which is when i bought it. I don't care, I sold a bunch of investment properties then, and took the money off the table.
  • February 07 2009
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Profile picture for valerie52
Its not upsetting to me. I don't live in the area that it has effected. I was wondering what those other 10 homeowners are going to do when they have mortgages that are in the 475,000-570,000 and they can only sell for 250,000. They won't be able to get their mortgages refinanced. Those lenders aren't about to lose money. Just wondering. Yeah here in Washington we were slow to catch up. Everyone was buying homes in that price category. I kept saying whose going to pay for them? I was lucky my family has been in the house since 1946. We started with 12 acres got it down to 1. I can see it now. All homes dropping to 100,000 - 150,000. Boeing will eventually leave. The Boeing employees and Microsoft better get ready.
  • February 07 2009
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most foreclosures are NOT ransacked, most need only minor tidying to be in similar shape to other homes.

Even if it was beaten down, most of the time, 20k brings a home back. Add the needed repair to the price of the foreclosure home, and you now have your comp. By the way, you and the other 10 homes are in denial, thats why this news is upsetting. Seattles prices are trending down now, despite all the arguments on zillow a year ago from one seattle poster that it would never happen. Prices will drop for the next couple of years.
  • February 07 2009
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