In a soon to be released research publication by economists from MIT and Harvard, foreclosures appear to have the greatest negative impact on the value of a home, as compared to other forced sales. The article, entitled “Forced Sales and House Prices” is to be published in the American Economic Review and was written by MIT researcher Parag Pathak and Harvard researchers John Cambell and Stefano Giglio.
Based on data of 1.8 million home sales in Massachusetts from 1987 to 2009, the research found that the value of a home dropped by 27 percent when sold in foreclosure, as compared to 5 to 7 percent when sold due to death of the owner and 3 percent when sold due to bankruptcy of the owner. In addition, the research found that sellers of non-distressed occupied properties took a hit in their price if sold in a neighborhood that had a foreclosed home on the market. It was found that the value of a home dropped by 1 percent, on average, if it was within approximately 250 feet of a foreclosed home. And I would assume that in certain areas, like Detroit, the “blight” factor increases that percentage significantly.
So, what does this mean to the securitization investor. That once again, foreclosure is not in the best interest of the investor. Not only is the investor put in the back of the line for cash on the liquidation of the loan, with the trustee and servicer placed ahead of the investor for reimbursement of fees, expenses and advances, but the amount to be collected will be significantly discounted. Therefore, a modification would serve the investor better. However, the servicer does not have the economic interest in having the modification work. Based upon the rate of re-default, cost of modification, necessity to advance and the servicers general inability to act as a mortgage underwriter, servicers would rather hand over the loan to a foreclosure attorney for a fast turn of the underlying property.
More proof that the investor is the once taking the hit. And they don’t even know it.
I agree. Foreclosures need a huge amount of work.92 percent of consumers expressed that if they bought a foreclosure, they would be willing to make home improvements after they closed the deal, with 65 percent being willing to invest 20 percent or less of the purchase price. Although stories of foreclosures
ReplyDeletemissing plumbing and every electrical fixture are very memorable, many foreclosed homes need only the (relatively inexpensive) cosmetics that many new homeowners want to customize no matter what kind of home they’re buying: paint, carpet,and many others.
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Your lender desires to prevent you at your residence up to you should stay there, so work together with those to avoid foreclosed process. Just in case you are unable to avoid having your home repossessed, you can find actions you can take to conserve yourself the trouble for being foreclosed on. Engage with your lender about these steps, making sure that you and your lender are saved the problem of studying the foreclosure process.
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The causes for foreclosure are simple. When there has been a failure to pay the required mortgage payments for a period as specified in the lending agreement, then foreclosure is a likely result as the lender mobilizes to recoup the debt owed in other ways.
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Borrowers who seek foreclosure help early are much more likely to work out a solution, no matter how dire their situation. Based on your situation, your lender may be able to provide the foreclosure help that you need.
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Thanks. The best way to prevent foreclosure comes from educating yourself about how foreclosure works and knowing your best options. This should bring to light your choices available and definitely will help alleviate your stress by learning so what can and will not happen when you are dealing with a foreclosure. Knowledge of the topic of foreclosure will assist you to prevent foreclosure scams and various costly mistakes.
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