| |
| |
|
Real Estate Information |
|
|
|
The Value of Foreclosed Property
The discount on a foreclosed property is not as great if the state allows deficiency judgments by lenders against borrowers. In contrast, the discount is larger if the property is being sold in a state that requires foreclosures to proceed through the judicial system. Lastly, appraisals seem to be more accurate for low down payment loans, leading to smaller discounts at foreclosure. Foreclosed properties may be vacant for a substantial period before they can be sold as the legal process of foreclosure runs its course. During this period, the lender's costs of holding onto a foreclosed property increases because a property that should have been generating mortgage revenue, generates none. In general, foreclosed properties sell at a substantial discount and this discount is larger when foreclosure occurs early in the loan's life. The magnitude of the discount varies by the type of house, borrower and seller attributes, loan types, time and locations. Because local governments, not the federal government, define foreclosure laws, variations in how long and how costly the foreclosure process is also has a substantial impact on the size of the discount. Any borrower who provides a small down payment can end up in a negative equity position even if prices only drop slightly thus increasing the likelihood of default and the magnitude of the losses on a default. Since defaults and losses are sensitive to down payments, especially as they become small or even approach zero, lenders are likely to be sensitive to the accuracy of the appraisal in low down payment loans. For example, appraisers provide a variety of different types of appraisals ranging from full appraisals, which include a detailed inspection of the property, housing stock, neighborhood, and available comparables to driveby appraisals and only electronic appraisals. If more accurate appraisal techniques are used on low equity loans then the value of foreclosed property should be higher for loans with smaller down payments. In addition, the behavior of the property owner prior to foreclosure (during ownership) may also have an affect on the value of the property. Not all property owners are the same. Some will more aggressively maintain the property and others will allow it to depreciate over time through a lack of maintenance. This will lead to different rates of house price appreciation and property value. The requirement of a judicial foreclosure process may lower the resale price of the property because it is vacant or rented for a longer period of time, which should increase the opportunity cost of holding the property under the lender's ownership. However, this effect is probably smaller than the effects of the right of redemption, because the new owner of the property at least has a clean title. In addition, deficiency judgment provides more power to the lender and therefore may lead to a quicker resolution of the foreclosure process, providing less time for the property to deteriorate. Again, this effect should be much less important than the right of redemption in terms of house prices and the recovery from sale. Previous research has focused on the relationship between how much of the outstanding balance on a loan is recovered and state foreclosure loans. State level foreclosure laws can also have impacts on the appreciation of foreclosed property. For instance, if a loan is foreclosed in a state that allows the borrower the right to redeem the property after paying the foreclosure expenses for up to a year after the foreclosure date the discount increases. However, the impact of foreclosure laws is different for each type of law. For instance, if a state requires that the foreclosure proceed through the judicial system the discount also increases, but the discount is smaller in states that allow the lender to recoup any losses from other assets beyond just housing. In summary, many factors impact the value of foreclosed property. The simple fact that the borrower has defaulted indicates that it generally will be sold at a substantial discount relative to similar properties. This discount is mitigated somewhat if the state allows deficiency judgments by lenders against borrowers. In contrast, the discount is increased if the property is being sold in a state that allows statuary right of redemption. Lastly, foreclosed properties tend to follow the movement of house prices in the area but in a muted fashion. For instance, if house prices in general increase by 100 percent then the sale price of foreclosed property will increase by 89 percent and any other discounts discussed above. Therefore, the discount becomes larger the more prices have increased. John Michael is the author of "Getting Started As A Real Estate Investor" "The Art Of Foreclosure Investing" "How To Do A Title Search" "Guide to Property Inspections" "Creative Investing Using Contract For Deed's". Learn how to empower yourself as an investor with this creative investor and teacher. Visit at http://jmichaelrei.com
MORE RESOURCES:
Real-Estate - Google News |
|
|
|
RELATED ARTICLES
Donald Trump on Real Estate I love what Trump says about the business of real estate.I am a big believer in setting up business systems for all my clients. Foreclosure Foreclosure under a mortgage requires a court ordered sale conducted by the sheriff or other court-appointed official. Foreclosure process is called judicial foreclosure. How to Prepare Yourself for Owning a Dual Purpose Second Home If you are thinking about buying a second home, you are not alone. A 1995 survey by the American Resort Development Association found that 60 percent of households surveyed feel they have a likely chance of purchasing a recreational property in the next ten years, a figure that rose 30% from the survey in 1990. The Real Estate Market In Spain: Making Profits Out Of Sand The Real estate market in Spain keeps gaining momentum and is of a vital interest among overseas investors. Property prices in the country continue growing at rapid pace due to a sustainable development in many areas of the mainland and the islands. A Possible Bargain: Foreclosed Properties In the superheated San Francisco Bay Area property market, foreclosed properties are available at as much as 40% below market value, writes Srini Saripalli.The last few months of a calendar year are considered sluggish for transacting real estate, but Silicon Valley seems to be an exception to this. Why is Now the Time to Buy in Turkey? Turkey is a paradise of sun, sea, mountains, and lakes that offers the vacationer a complete change from the stress and routine of everyday life. From April to October, most places in Turkey have an ideal climate that is perfect for relaxing on sandy beaches or enjoying the tranquility of mountains and lakes. I Already Have an MLS Listing, Why Do I Need an Internet Ad? In today's real estate market, astute buyers are also looking to realize savings by dealing directly with the seller. They use internet search engines and keyword sets (Atlanta real estate advertising, Atlanta for sale by owner, Atlanta FSBO) to locate for sale by owner (FSBO) properties on the web. Good Faith Deposit - Real Estate Transactions In a real estate transaction, a touchy issue is how much trust the seller has in a buyer. The existence of a good faith deposit helps put a seller at rest. Buying Property in Bulgaria : How to Avoid Making A Bad Investment Where is it possible to buy a property on your credit card? Bulgaria, of course! With thousands of potential property buyers seduced by Bulgaria's bargain property prices, the temptation is to think that making a solid return is a no-brainer! Searching the Internet, dozens of articles and property websites boast about the 100% capital growth that can be achieved on Bulgarian property investments in the space of 12 months.For first time investors with small budgets looking for a step onto the property ladder, this seems like an opportunity almost too good to be true! The result is that thousands of novice speculators and second homebuyers are flocking to Bulgaria to cash in on the investment opportunities it offers. Investment Real Estate Secret: Buy a House Today, With No Money Down If you've read my article "Purchasing Property With No Money Down. . Coming to Las Vegas - the Las Vegas Real Estate Boom Nobody seems to be 'Leaving Las Vegas' anymore - in fact just the opposite is true. Just as in the time of the rush Las Vegas real estate has been drawing the attention of investors and new citizens alike. Buying a Home: The 5 Biggest Mistakes that a Home Buyer Makes As a Professional Real Estate Inspector I get to see and hear the right and wrong things people do when buying a home. These 5 tips will help you choose the right Real Estate Agent the first time. Real Estate: Buyers Agent, Sellers Agent & Dual Agent (defined and explained) There is a relatively new and not always well understood practice in Real Estate sales; it is called Buyer Agency or Buyer's Agent. Until recently Realtors and agents usually represented the seller, in opposition to the buyer, during the real estate transaction. Using Color Psychology to Sell Your Home When painting your home for resale, choosing the right colors can make a huge difference in your paycheck at closing. For instance, did you know that the exterior color of houses selling most quickly is a certain shade of yellow, but that choosing the wrong shade of yellow can kill a sale?You'll find many brochures in paint stores, showing various combinations of exterior paint colors. 4 Dangers In Flipping Real Estate If you have recently purchased some real estate for investment purposes, you are in good company. Recent reports suggest that as many as 25% of these purchases are made by those who plan on using the property for investment purposes only. Ten Big Mistakes That Will Lose That Property Sale If you are serious about selling your home, you probably go to a huge amount of effort when you show potential buyers around your property. You clean the bathroom until it sparkles; vacuum the carpet; brew coffee or bake bread; maybe you even banish the kids to their grandparents, but did you make one of these Ten Big Mistakes that can lose the sale - but are so easy to avoid. Hurricane Katrina And The Impact On Real Estate Prices In the wake of Hurricane Katrina's wide path of destruction, the real estate market will be affected perhaps in ways not fully understood or expected. If recent hurricane recovery history holds true there will be several good things to come out of all destruction. What is a Foreclosure? A foreclosure is an action taken against a property owner by seizure of his/her real property. It can be for many reasons. Reprint Rights and How To Use Them To Generate A Steady Income I can't emphasize enough how important it is to have a step by step guide for sellers and tenant buyers. However, many of you are missing out on other income streams that these step by step guides can generate. 10 Things You Shouldnt Do When Youre Buying a Home Home Buying Don'tsYour home buying process is well underway. The sellers accepted your offer to purchase.
|
| home | site map | |
| Realty Web Services © 2007 | MesaSky Services |
