Atlanta Real Estate | Atlanta Housing News for Real Estate

It is interesting to thing that foreclosures are the hot sales item in many real estate markets today, and yet no one speaks of the impact on our markets.  Unlike a normal resale property, when a resale closes... a loan is redeemed, and equity of the owner is freed up. The bank is also in a position to write another new loan. With that equity, the home owner can also purchase other property or properties.  It has a positive multiplier effect.  However, when a foreclosure or bank owned home is sold in the current market more often than not it is a loss. If a bank lent out 200K, and sells for 180K plus commissions and maintenance, they are not in a position to lend out more money.  As a matter of fact when a bank takes a loss their lending power reduces in multiples.  At the same time, since the property is owned by an institution, no other sales are made.  Unlike an individual resale, no other loans are made, and no other property is purchased.  I would rather help an individual seller than a bank that should not have lent the money out in the first place.

The downside of foreclosures is that they also wreck a neighborhood's home values.  Listing agents that assume that the appraiser does not use comps from foreclosures are dead wrong, especially when foreclosures become the norm.  Several recent foreclosure properties sales in one neighborhoodd can pull down property values many thousands of dollars.  That hurts other homeowners in several ways, one way is that their taxes are held to a higher level of last years sales, but the market value has already lowered. It is not fun to pay taxes on a 450K home if the market value is only 375K.  Another way that our markets are hurt by foreclosures is that many are purchased by investors as rental properties.  This may change the face of a neighborhood that once prided itself with owner occupied properties, and now is inundated with a large percentage of renters.  In condominium and town home units many lenders will not look favorably or make loans if the percentage of renters are disproportionate to the number of owner occupied units.

Yes I agree, that foreclosures are necessary to return a market to a healthy position, but as a real estate agent I know my buyers can often do much better purchasing a resale, or even a short sale.  I also bare less liability on an "AS IS" sale.