Discover What Makes Foreclosures So Bad For The Entire Neighborhood

Foreclosures are a nightmare for any homeowner who is facing financial difficulties. However, foreclosures not only hurt the homeowner and the lending institution, it can also hurt your neighbors and the neighborhood at large. How can your neighbor's defaulting home affect your own property?

In this article we will discuss why a foreclosure can leave a negative impact on the entire neighborhood at large.

Foreclosure lower home appraisal values.

If you have a big neighborhood that only has one or two foreclosures you will probably not see much, if any, decrease in your property value. Appraisers will try to use other homes in your area that are in good standing when they evaluate your home's fair market value. The problem comes in when there are a large number of homes in the area that are going through foreclosure. Most of the time the appraiser will try to avoid using a foreclosed home in their calculations because it doesn't always allow for the most accurate representation of the home's value. However when there are a lot of foreclosures in the area it means the entire market is at a lower price point so the foreclosures have to be used. When this happens your home, even if it is in good standing, will suffer because of the other home's in your area that are going through foreclosure.

Bad For Homeowner's Associations

The homeowner's association can provide valuable benefits to a neighborhood. Using the fees, HOAs can maintain sidewalks, roads, neighborhood parks, and other common areas. In addition, some associations provide events to allow neighbors to mingle and form their own sense of community, and some HOAs even hire private security patrols to add to the safety of the neighborhood. None of these things can be accomplished without paying dues.

Someone who is facing foreclosure on their home is also someone who has probably not been able to pay the monthly HOA fee either. If a few people cannot pay the fee, it is not so significant. However, if a large number of people cannot pay the HOA fee, then the homeowner's association suffers. The HOA then is forced to run on a constrained budget and it may even have to hike up its dues from paying neighbors just to survive.

Written in the paperwork, many homeowner's associations have the ability to conduct foreclosure proceedings if the owner does not pay the monthly dues, just as a lender has the right if the owner fails to pay the mortgage. However, unlike lending institutions, many HOAs do not have enough funding to pursue the matter to court.

Foreclosures devalue buyer's perceptions of a neighborhood.

Regardless of what a home appraiser says about the price, what makes a house sell is its desirability to a buyer. In this, buyer's perceptions are very important, and buyers have second thoughts of purchasing a home if the neighborhood looks like it is heading downhill. Although there are more laws preventing this from happening, sometimes bank-owned foreclosures are given no attention and over the course of a few months, it is clear that the home is abandoned. The yard isn't mowed. The bushes are overgrown. And then, hoodlums spend a fun afternoon breaking windows. All of these are inner alarm bells to potential buyers who will see nearby abandoned areas as a source of crime and neighborhood neglect.

If you are attempting to sell your home in an area that has had a lot of foreclosures it can be a hard thing to accomplish. You are going to have to lower the price of your home in order to deal with the foreclosures being at rock-bottom prices. If you want to help out your situation the best thing to do is to get with a neighbor, or a group of them, and do things to make the house look not abandoned. Park a car in front of the house, take turns mowing the yard, and if possible do the same thing for all of the abandoned homes in the area.