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By Marcie Geffner, bankrate.com | Published: 1/25/2008
Foreclosures have been on the rise, according to data compiled by the Mortgage Bankers Association, and at least a few, if not many, foreclosed homes may be on the market today in just about any neighborhood, regardless of the residents' socio-economic status.
Sellers don't have many options in a strong buyer's market, but there are some tactics that can tip the balance between a sold home and what Realtors call a "stale listing," which refers to a home that has been on the market so long that buyers have become suspicious as to why no one has bought it.
Home sellers need to understand that foreclosed homes, which are often referred to as real-estate-owned, or REO, aren't all the same and consequently don't all have the same impact on nearby homes that are for sale.
It's helpful to divide foreclosure properties into three groups, according to Dave Billings, West Coast regional director for Redfin, a multistate realty brokerage company.
Auction foreclosures typically aren't included in the MLS because they aren't listed for sale with a broker. However, the sales prices of these homes may be obtained after the auction through tax records.
Listed foreclosures can be tough competition for owner-occupied homes because banks and asset managers usually are more willing to negotiate prices than the typical homeowner would be, Lynch says. That's especially true today, since banks have more REOs on their books, and they don't want to pay the costs to maintain and manage those properties.
Auction foreclosures are "a separate market," but if buyers know the sales prices of those properties, "that is going to impact their thinking about the value of your home as well," Billings says.
Home sellers should be aware of auction properties even though they may not be directly comparable because of their poor condition or lack of wide exposure to the market.
The impact of foreclosures on the value of nearby houses was quantified in a 2006 study, "The External Costs of Foreclosure," by Dan Immergluck of the Georgia Institute of Technology and Geoff Smith of the Woodstock Institute. This study used statistical models to analyze data collected in Chicago in the late '90s. The researchers concluded that each foreclosure within one-eighth of a mile from each home reduced the value of that home by 0.9 percent.
Yet, "fair market value is still an option" for home sellers, Billings says. "Just because a foreclosed property is down the street doesn't mean you have to take $15,000 less than your house is worth. But it does mean that any sort of shoot-the-moon option isn't available. It requires a laser focus on a true justifiable fair-market price for your home."
Not all foreclosure homes are in poor condition, says Alan Wagner, a sales agent with RE/MAX Gold in Elk Grove, Calif., and 2008 president of the Sacramento Association of Realtors.
"A lot of people who move out because the bank is foreclosing will still vacuum the carpet on the way out. The house is not trashed; it's a very nice house in a good neighborhood that now belongs to a bank," he says.
To compete against these properties, sellers need to make sure their homes are not only in top condition, but also accessible and well-presented to the market.
(Distributed by Scripps Howard News Service.)
