I was astonished to read this article from the New York Times after Ann Albergotti from
Platinum Marketing (our PR go-to-gal) sent it my way! But at the same time, I was so relieved to see someone shine a light on the seriousness of foreclosures and how it affects
everyone!
I am a strong believer that if we all do our part and take moments out of our day to help someone in need, that we will all come out on top! If each of us took an opportunity to talk with just 5 people within our neighborhoods, within our work, church, or even at our weekly events, to share with them the functions of a
short sale and the ways it can truly help an individual and/or their family in need, I think we would see our economy as a whole rebound in an insurmountable way!
So my challenge to you is this.... talk with 5 people, only 5, and tell them about the detriment of foreclosure, the affects it can have on hundreds of people, and the way in which all of that can be avoided.
Short sales are our bread and butter and we are confident that that we can see so many people pull out of this on top if they will only step out and get in touch with us. We want to help, we want to make a difference, we want to change the future of as many lives as possible, and if that's done through a short sale, then so be it!
Beware of Neighbor’s Home Foreclosure By BOB TEDESCHI, The New York Times
WHEN it comes to selling your house or planning your next home equity line of credit, being a nosey neighbor could very well pay off.
That’s one implication of a recent report from the Center for Responsible Lending, a consumer advocacy group based in Durham, N.C.
The report, which was released in May, focuses on the ripple effects of home foreclosures, and suggests that homeowners who are concerned about their home’s value should watch for signs of trouble among their closest neighbors.This year alone, it says, foreclosures will cause an estimated
69.5 million nearby homes to suffer price declines averaging $7,200 per home. The loss in property value could total $500 billion.
The resulting loss in financial flexibility is significant. “Homeowners who had counted on using their home equity to finance their retirement, cover tuition costs, start a small business, or pay medical bills in many cases no longer have this option,” the report said.
Ellen Schloemer, the executive vice president of the Center for Responsible Lending, said that over the next four years,
foreclosures would affect an estimated 91.5 million neighboring homes. “As the foreclosure crisis continues to worsen, the contagion is spreading,” Ms. Schloemer said. “You can’t just say those foreclosures are hurting someone else.”
The rate of home foreclosures has rise sharply since 2007, when the first subprime adjustable-rate mortgages began resetting to higher rates. But even borrowers with good credit have defaulted on their loans as the economy has faltered.
According to the Mortgage Bankers Association, an industry trade group, about 1.4 percent of all first mortgages entered foreclosure in the first quarter of this year, a 20 percent jump from the fourth quarter of 2008, and a record high.
The center’s report relied on forecasts from Credit Suisse, which said late last year that about nine million homes would probably go into foreclosure in 2009 to 2012. The center also used late 2008 data from the Mortgage Bankers Association to estimate this year’s foreclosure figures (about 2.4 million homes).
Two earlier reports released by the Center for Responsible Lending examined the spillover effects of the mortgage crisis. But this year it relied on new research about how a foreclosure affects neighborhood home values — specifically, a 2008 study that includes researchers at Fannie Mae, the government-sponsored agency, and the University of Connecticut.
This study found that homeowners who lived within 300 feet of a foreclosed residential property experienced a drop of 1.3 percent in home value; those living 300 to 500 feet of the foreclosed home typically see a drop in value of 0.6 percent.
John P. Harding, a professor at the University of Connecticut’s Center for Real Estate and Urban Economic Studies, and an author of the study, said the properties that are most affected by a foreclosure are the ones close enough to see the peeling paint, broken windows and overgrown lawns that often accompany such situations.
The worst time for immediate neighbors to sell their homes, refinance or cash out some of their home equity, Mr. Harding said, is just before the bank takes title to the property, because that is the point of greatest neglect.
After that point, Mr. Harding said, many lenders will at least maintain the property’s appearance well enough to attract prospective buyers.
OF course, the best time to try to sell a home or convert equity into cash is when neighbors are on sound financial footing, though it may not be easy to determine.
Job loss is the biggest cause of mortgage default, according to industry experts, so if a neighbor becomes unemployed, you should probably start your own clock ticking.
For those living outside the immediate vicinity of the foreclosure, but still in the neighborhood, Mr. Harding said home values typically bottom out around the time when the bank actually sells the home.
“My advice would be to try to ride that out, not panic, and know that this is the peak effect from lower-priced competition,” he said.
Mr. Harding said that banks, municipalities and the federal government are justified in financing foreclosure-avoidance programs, but not if they help homeowners just barely afford to stay in their homes. In such situations, neighboring homes could still see values drop.
“You want to offer help at a level at which people can still do critical maintenance to the property,” he said.
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