Foreclosure Listing Growth Pushed Down Home Values

Foreclosure listing in Northeast Florida keeps on growing, further pressuring down home values in the area and casting a shadow over the efforts of both state and local governments to stabilize and strengthen the housing market.

Industry experts said that the increase in foreclosure and short sales has caused home values to slide down further. They said that home sellers are forced to reduce the sale price of their properties to be able to compete with discounted prices of foreclosed homes. And sometimes, there is a need for buyers to spend more money to finance a property when appraisal put it at low value.

Northeast Florida Builders Association executive director Daniel Davis said that sometimes, a reduced property value could kill a sale.

Regions Bank residential production manager and vice president Carol DeMarco said that because of the volume of foreclosure houses and short sales, many homes listed for sale are priced below the fair market value.

Industry experts said that home prices are showing some signs of stability. However, a great number of distressed foreclosure home and short sales still need to be closed and then cleared from banks’ inventory before the housing market could reach stability.

As of May, 282 foreclosed properties were closed, an increase of 151.8 percent from the same month a year ago. Sales from foreclosed homes and short sales made up about 25 percent of overall closed sales in the housing market in Northeast Florida in May.

Lenders will determine the loan amount based on either the appraised value of purchase price of the property, whichever is lower. In the event that appraisals come in at a lower amount than the purchase price, then the buyer needs to invest more money to obtain the financing or the seller will renegotiate the price to reduce the property value.

DeMarco explained that typically, appraisers will note whether comparable sales are foreclosure or short sales. However, appraisers could not make an allowance when determining the average market value because of foreclosures.

Cook Appraisal Service President Bill Cook said that during appraisals, there is always foreclosure or short sales whether in the low-end or high-end home level.

In June, the median sale price was $161,000, representing a decline of 18.3 percent from the same month the previous year.

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