Almost Half of US Foreclosures on Market Badly Damaged
02 November 2011
This week a new twist on the US foreclosure epidemic. According to the Campbell/Inside Mortgage Finance HousingPulse, a survey of real estate professionals, almost half of all foreclosure listings are so badly damaged as to need serious renovation to make them habitable. The percentage has been so high for the past 2 years according to the data.
The data also shows that last year 13.9% of all home sales were damaged foreclosures. In February this metric reached 14.9%, but fell to 13.2% in August. This is equivalent to 45.8% of all foreclosure sales said the firm. Because of the length of time foreclosures take to process and sell, which is currently averaging just under a year, damage to the properties is increasing.
On one hand, damaged foreclosure properties are like a plague on an area’s housing market. Just one or two seriously damaged properties in an area, can drag the values down in a neighbourhood, especially when they linger on the market for a prolonged period. A normal foreclosure sells for 20-30 percent below open market homes in the same area, and badly damaged foreclosures take this down to 40%. These massively discounted sales go into the comparisons pot that appraisers use to determine the value of homes in the area for sale or refinancing.
But on the other hand, local tradesmen often benefit when the damaged homes are bought by investors. Of investors surveyed by Move, Inc. -- operator of Realtor.com – last April, 42 percent planned to invest their own time and energy to improve, repair and maintain the properties they buy, but 29.5 percent said they would hire tradesmen. The remaining 28 percent planned to buy move-in ready.