Foreclosure glut deflates all home sales

I'm often asked whether (or why) distressed property listings and sales (foreclosures, short sales) affect the value of normal properties offered for sale under standard terms.  Here's a commentary on that topic from MarketWatch:

Foreclosure glut deflates all home sales Realty Q&A - MarketWatch

The bottom line is that the market prices homes in light of available substitutes, so distressed properties, though usually in much worse condition than other properties, definitely have an impact in the eyes of buyers, appraisers, and lenders.
Adjusting distressed property values to make them comparable with properties in good condition is more an art than a science, often hinging more on the relative bargaining power of the counterparties in an actual transaction than anything else.

Greater difficulty is encountered when a market is dominated by distressed sales, with few standard sales available for comparison.  I've encountered and overcome this problem for several clients, but again, it's an art, not a science! - David

Posted using ShareThis