The Truth About Foreclosures And Your Home’s Value



Real estate appraisers are often faced with difficult questions. One such question is if the low sales price of a recent bank owned foreclosure sale (REO) or auction sale transacted in a client’s neighborhood negatively influenced the appraised value of their home. Sadly, the predominant answer to this question is yes.

If the bank owned foreclosure or auction sale was considered a “market sale” and was not transacted under duress, then the appraiser must consider it together with the other neighborhood home sales when the property is appraised.


That being said, we, as appraisers, consider the fact that some auction and foreclosure properties are in need of repairs such as new paint, flooring, doors, pool repairs, roof repairs, new fixtures or they had some other deferred maintenance that will require a significant cash expense by the buyer. It would be quite fair for an appraiser to adjust the value of a comparable sale upward if the said sale was in need of repairs on its sale date.


Here in Vegas, we’ve found that home valuation decreases can vary significantly from one neighborhood to the next simply based on the number of investor foreclosures and auction sales occurring in a specific neighborhood. In neighborhoods where there aren’t a lot of out-of-town investors, there are generally not too many bank owned foreclosure and auction sales. Whereas investor rich neighborhoods see some of the largest sales price decreases due to a high rate of foreclosures.


Even when a ready, willing and able buyer presents an offer, a bank owned foreclosure property in your neighborhood can take several weeks to several months to sell and such a property can be even more damaging when it appears to be falling in value as it is offered by agents at a declining price in an attempt to secure offers for the bank. The longer a foreclosure property remains on the market, the more it appears to the lenders and the public that the home, and even the neighborhood, is undesirable.

Therefore, one can say that considerable sales price reductions for bank owned foreclosures and auction sales can cause a negative influence on your home valuation. Keep in mind though that a lot of considerations go into this kind of situation, and if you want an accurate valuation for your specific situation, it’s best to consult a professional.

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