Because the value of a home is calculated on the base comparable sales in that area, if there is a foreclosure even in the vicinity of a home it can affect its value. One may still suffer a loss while trying to sell a home or while opting for refinancing, even if their credit is good. Invariably in an area which has witnessed a foreclosure, the value will come down.
An ailing real estate market manages to infect the whole economy, neighborhood by neighborhood and this makes it difficult for the borrowers to draw out cash from their homes. According to experts, if the borrowers are not able provide finance at lesser rates then this could lead to an increase in the number of foreclosures. Florida, California and Nevada are the three states that have seen the inflated prices of homes dropped the most.
In the month of January, the foreclosure rate in the U.S jumped 57% from a year prior. About 230,000 houses were on the verge of foreclosure across the nation, according to the records maintained by Realty Trac. The highest numbers of foreclosures were recorded in Nevada, California and Florida. Hardest hit by the foreclosure crisis were the scattered suburban areas which were greatly popular among people buying homes for the first time were.
Unfortunately there are too many instances of home buyers who have borrowed up to 100% of the value of their homes unable to afford them otherwise. Some of these home owners are now turning their back to mortgages and are giving up the homes to the lenders.
The market has a large number of properties facing foreclosure and it is difficult to assess what the values of property would be in such a situation. The entire process of appraisal has become much more complex than before.
Contributed by MLR Realty
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