Relocate With Jen: A Battle Field of Foreclosures

What if the foreclosure rate in a neighborhood is so high that it has become the NORM?

What if your home is the only home left standing on a battle field of foreclosures?  You cannot protect yourself from being compared to a foreclosure.  Even if you price your home reasonably you run the risk of not appraising.

The problem happened to me (my client) -- The neighborhood had no non-foreclosure sales to use as comparables-I went about  2 miles outside the neighborhood to find similar homes and was only able to find a couple non-foreclosure sales to make an accurate comparison . But the fact that the sales in the neighborhood in the last 8 months were either foreclosures or short sales became relevant in my presentation.  The client was surprised by this information but understood because he had noticed neighbors moving out suddenly and knew some had lost jobs.

Typically, when pricing a home I would not include distressed properties.   A distress property's sale price and/or terms are usually not a true example of the current market.  The home may be physically similar -- same square footage, style, quality of construction and features but was priced to be "given away".  The purpose of selling a distress property is so significantly different it makes it no longer comparable to an average seller.  

A seller needs to be informed of what is happening in the local or national market - good or bad!!  No one likes to be the bearer of bad news but I would not be doing my job if I left out this or any other important real estate information.  

For those sellers living in areas hit even worse by the housing decline, pricing your home may feel like a guessing game.  One foreclosure or short sale can greatly depreciate the overall value of a neighborhood. If you are in a sea of vacant foreclosures, auctions or short sales it becomes a FACT.

 If people can no longer afford an area they move and prices fall to attract new buyers. This is true in all business.  If your favorite shop started charging $10 for a cup of coffee - you would either afford it or stop shopping there. The shop owner would eventually reduce his prices to attract new customers- or go out of business (i.e. foreclosure)

 So many misguided buyers flock to short sales & foreclosures like the Clearance Rack at Macy's.  It is so easy to forget that sometimes no one bought it because it was overpriced in the first place or not very well made. If a seller/investor/builder is going into foreclosure they have NO MONEY to make basic repairs - corners are being cut.  In some cases the property has been abandoned for months before the bank forecloses.  -- Appliances are sold off, HVAC are stolen or sold.  Even the nicest neighborhoods can have "squatters".  Light fixtures may have been replaced with cheaper ones and make have been improperly installed.  The hot water tank could have burn out or ruptured when the water was cut off.    Distress properties are discounted for a reason - If the bank could get full price they would!!!

Just because you think your home is Godiva Chocolate doesn't mean it's not a Hershey Bar.  Sell and market your home for what it is so that you don't disappoint the buyers that see it.  Take into consideration all the factors occurring in your neighborhood. 

A year ago an agent had suggested pricing my client's home about $35,000 higher than my suggested price.  To better learn the market, we went to preview the one other home for sale in the neighborhood.   He felt his neighbor's home was overpriced.  My client was not willing to pay that much for a slightly larger home in his own neighborhood.