A subject that has been pervading the real estate world and the nation on the whole is foreclosure. While most homes and neighborhoods in the Bryan/College Station region remain unaffected thus far, the number of foreclosures is slowly – but steadily – rising. As a homeowner, one surely does their best to avoid this stressful and painstaking process. However, most homeowners are unaware that if their neighbor experiences a foreclosure, their own property value will suffer as result.
A single foreclosure can decrease the value of homes within 250 feet by an average of 1%, according to a recent MIT study. The study, which examined 1.8 million home sales from 1987 to 2009, also found that the typical foreclosed home has its post-foreclosure price slashed by an average of 27 percent. Why do foreclosures cause such a large decline in the home sale price relative to other kinds of forced home sales? The same study noted that if a house is sold after the death of an owner, the value drop 5-7%. If a homeowner declares bankruptcy, the home price is affected by only 3%.
The main reason foreclosure has such impacting results on the surrounding homes is location. For the same reason that the new high school being built in College Station is increasing property values of homes in the area, a foreclosure in one’s neighborhood will affect the surrounding homes. The homebuyer also sees a few other factors in this situation. One, the foreclosed home may be anywhere from poorly maintained to in a complete state of disrepair. Neighborhood appearances enhance real-estate value, and ill-maintained houses make an area less desirable. Secondly, even without visible deterioration, when a home is resold quickly at a discount, it affects whole neighborhood’s values. A savvy homebuyer’s benchmark will usually include houses in the same neighborhood.
Even though this study found that foreclosures only slightly dent surrounding property values, it does raise a few questions for concerned homeowners. Whether or not there is a “tipping point” for neighborhoods such as these is an issue raised. As foreclosure rates continue to rise in College Station and Bryan, this is a subject homeowners should be thoroughly aware of.
The real estate website Trulia tracks and lists foreclosure data (and home information) for each city. In the past month alone, College Station has seen four foreclosed homes sell, and ten more join the market. In Bryan, 18 foreclosed homes have been resold, and 34 additional foreclosed homes have entered the market.
If you are a homeowner affected by foreclosure and would like to discuss your options, such as a short sale, please call me at your earliest convenience. If you are concerned about foreclosures in your neighborhood and have any questions regarding how it may affect you, don’t hesistate to contact me. And as always, for expert real estate advice, whether you are buying or selling a home, continue to check back or call me for timely information!
Clay Lee – Realtor
Century 21 Beal, Inc.
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