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The Value Battle That Makes Buying Foreclosed Homes Difficult

by Elaine Ryan

When looking for property for sale, many people turn to foreclosed homes as a way of saving money. But is this a good idea? There are some slight downsides to this approach that may make it a potentially bad investment.

A Foreclosure Will Negatively Affect Surrounding Property Values

One of the most troubling things about a foreclosed home is that it can seriously and negatively affect the value of the surrounding homes. For example, a real estate agent typically prepares a list of recent sales to each potential home buyer in a neighborhood. This list is used to help give them an idea of the selling prices of the general area.

So when a foreclosed home is in the neighborhood, this significantly impacts the selling price of its nearby homes. Even the person who is buying the foreclosed home will suffer from this problem. After buying the home, the values of the surrounding areas will remain weak for a long time, impacting their investment significantly.

Is It Still A Worthwhile Investment?

The trickiest part of assessing the value of a foreclosed property is deciding if it is worth the potential loss in property value. For example, a lengthy study on the value of foreclosed property came to the conclusion that it typically sells for anywhere between 22-24 percent less than it would have if it had not been foreclosed. This is a huge price reduction.

For example, a home that would have been worth $100,000 would potentially cost only $75,000. However, these prices can drop even lower in certain situations. For example, a foreclosed home in a low-income area is likely to be priced even cheaper.

Figuring Out If A Home Was Foreclosed

Those interested in finding a foreclosed home should take the time to investigate options in their area. There are several ways that they can figure this out. First of all, they can take the home address to the county records office and out if it was foreclosed. This typically costs a small processing fee and gives people an idea on individual property foreclosures.

This method is useful if a person already knows the address of the property that they want to investigate. Other methods include researching foreclosure listings in the local area. This method helps a person who isn't sure what property they want to buy.

Making the decision to purchase foreclosed property is often a tough one for the average homeowner. It requires taking the time to improve the overall value of a home and taking the time to talk to a real estate agent, such as at RE/MAX EQUITY GROUP-WEST HILLS OFFICE.