How Short Sales & Foreclosures Affect Your Home

No east metro Orlando community is immune to the short sale and foreclosure epidemic playing out in every neighborhood at every price level. On my street in east metro Orlando, 5 of 69 homes are in some stage of foreclosure. I watch and worry as these homes quickly go from bad to worse. These short sales and foreclosures have serious negative affects on your home, neighborhood and ability to sell.

Home Value A straight seller - an owner who has equity in their home and is selling by choice - today is competing with majority short sales and foreclosures. These parties are not traditionally motivated (sell high, sell quick) and are willing and able to sell below market value. These short sales and foreclosures are undercutting competing homes and selling at a substantial discount because they can afford to. In many quality east metro Orlando neighborhoods, the only homes moving at this time are short sales and foreclosures.

Security Vacant homes are targets for unauthorized activity such as partying and squatting. This kind of activity will only lead to more bad news. Illegal activity in vacant homes can start the spread of crime to neighboring, occupied homes. I personally overheard a conversation between a police officer and a young man during an 11pm traffic stop that occurred in front of my home. Officer: “Where are you heading to?” Young man: “To the house up at the corner.” Officer: “That house is vacant and I’ve already arrested three people there.”

Image In most cases, once an owner has gotten to the point of a short sale or foreclosure, basic yard and home maintenance have long been forgotten.

Owners who are negotiating a short sale with their lender commonly rent their home to an unqualified/undesirable tenant for immediate cash flow in an attempt to prevent foreclosure. Even with a tenant in place, an owner in financial dire straights may collect the rent, pocket it and continue to neglect the home.

Owners who fail to negotiate a short sale with their lender may decide to take the most drastic step of all by abandoning their home. Owners who walk away from their homes leave an unattended and neglected home for their lender and authorities to pick up the pieces.

Property Crime I’ve personally seen foreclosures stripped of anything of value (appliances, cabinets, faucets, trim) including its infrastructure (hot water heater, furnace, plumbing). These property crimes are commonly committed by the owner who lost the home to foreclosure or someone connected to that owner. This situation makes the home virtually impossible to sell. It is the rarest of rare buyers who would even consider buying a home that has been destroyed by vandals.

HOA Your HOA is a business. It’s in the business of operating and managing your association: landscaping, gates, recreational facilities, dues collection…all areas that have a direct impact on the value of your home. HOA dues are used to operate the community, so when short sales and foreclosures don’t pay their dues for months on end, the HOA is shorted and cannot maintain normal daily operations. HOAs may have to make a difficult decision to curtail or eliminate otherwise standard community services. Even in the case of a short sale or foreclosure successfully changing hands to a new owner, it is common for that original lender to settle with the HOA for a discounted amount.