In a soon to be published study By Harvard University and Massachusetts Institute of Technology Economists John Y. Campbell, Stefano Giglio and Parag Pathak, the loss in value of a foreclosed property has been determined to be 27% on average.
They found that when a house is sold after the death of the owner the price dropped about 5-7% (estate sale). They also seem to think this death discount is related to less maintenance provided by older owners.
Foreclosed properties are not the same as the standard fair market home for sale in the same neighborhood or even the short sale in the same neighborhood. Foreclosure properties may have been vacant for some time and have possibly been vandalized, had the appliances and other contents stripped and even worse. (I have seen some with evidence of drug use, dead rodents and more health hazards!)
Furthermore, routine and required maintenance have most likely been neglected. The foreclosure process takes time. A year or longer of neglect can result in serious structural issues.
If you are in the market for a new house or condo, you can not use the foreclosed sale as the comparable. There are other factors influencing the sales price.
And, finally, if you are in the market for a foreclosure, note that the 27% average is not fifty cents on the dollar which is what I hear many amateur investors quote they are looking for in this buyer’s market.
For information on foreclosure homes and short sales in Brevard County, Florida - especially Viera, Suntree and Rockledge - call me at 321-693-3850 or email me.
Gary L. Waters PLLC, Realtor®, Century 21 Baytree Realty, Rockledge, Florida