Steps of Foreclosure

Foreclosures and Home Appraisals

Foreclosures and home appraisals are closely linked in this economy. Real estate agents and homebuilders across the country are complaining that home appraisals are coming in low and stopping home sales. It is estimated that one in four real estate appraisals are coming in low or with errors.

Most real estate agents agree that it's not fair to group foreclosures and home appraisals together. By doing this an appraiser might be comparing a distressed home to a brand new home.

Appraisers determine the value of a property by looking at recent sales of comparable homes. And generally, a foreclosure isn't used as a comparison for a standard home sale. But in some areas of the country, the market is flooded with foreclosured or distressed properties which makes it a challenge to determine the true value of a house.

So it's possible that if you are trying to sale your house in a neighbor that is made up predominantly of foreclosures or short sales, an appraiser might determine that your house is worth less than what a potential buyer is willing to pay. Part of this problem is due to the fact that some appraisers are hired from outside of the area where they are doing an appraisal and might not have enough knowledge of the local market to find homes that can be a better benchmark for regular homes.

It appears that in neighborhoods with high foreclosure rates, values for all homes are being pulled lower than in areas where there are few or no foreclosures.