When your neighbors sell short

[time4another]

how does it effect you/your property?

So glad that we did not buy at the peak of the bubble...

Heather

[SleeplessMommy]

Yes. It decreases your home valuation, should you wish to refi or get a 2nd mortgage or sell.

[time4another]

Fantastic...:

[CathMac]

Originally Posted by time4another

Fantastic...:

time4another,
The house is worth less than they paid for it regardless of whether they can afford to keep paying the mortgage, whether they sell short, or whether they walk away.

A short sale merely makes it official and is certainly preferable to them walking away and leaving it vacant. You need the bank's approval to sell short and I don't think it's given that often. I suspect if the bank was willing to sign off on it then the alternative was worse.
~Cath

[msjd123]

YES! We've had two foreclosures in our neighborhood and one short sale. We've also had one "regular" sale of an average house, and one regular sale of a beautifully remodeled, upscale home. When we had our house appraised just a couple of weeks ago for refinancing, all the houses I mentioned above were listed as comps because they took place in the last 3-5 months, and the foreclosures and short sale definitely had an impact on what our house ended up appraising for. We came in $30K under what I had guesstimated.

[mightymoo]

A short sale only refers to the fact that its lower than the mortgage - the sale price is still sold for market value. So yes.

[Fuamami]

Originally Posted by CathMac

time4another,
The house is worth less than they paid for it regardless of whether they can afford to keep paying the mortgage, whether they sell short, or whether they walk away.

A short sale merely makes it official and is certainly preferable to them walking away and leaving it vacant. You need the bank's approval to sell short and I don't think it's given that often. I suspect if the bank was willing to sign off on it then the alternative was worse.
~Cath

A house is worth however much someone is willing to pay for it. If they would have stuck it out, the last sale would have reflected a higher price, and been better for the OP's comps. Like the pp said, an appraiser bases the value of your home on similar properties in similar neighborhoods that have sold recently. If they could have continued to pay the mortgage, the value of the house is indetermined, and moot.

[time4another]

Originally Posted by msjd123

YES! We've had two foreclosures in our neighborhood and one short sale. We've also had one "regular" sale of an average house, and one regular sale of a beautifully remodeled, upscale home. When we had our house appraised just a couple of weeks ago for refinancing, all the houses I mentioned above were listed as comps because they took place in the last 3-5 months, and the foreclosures and short sale definitely had an impact on what our house ended up appraising for. We came in $30K under what I had guesstimated.

Here's the thing: If interest rates are low low right now and many many are not able to pay their mortgages thereby making the home values tank, then how are people supposed to be able to 'refi' their homes at a lower rate (for a lower term even) without penalties such as PMI (which the use of got the mortgage industry in this mess in the first place)?

I am glad we still have some value in our home but at the same time angry that the country is in this whole mess in the first place. I am also wondering how this infectious cycle ends because its clearly not just the individuals loosing their homes (by whatever method) its *everyone*.

Heather

[ShaggyDaddy]

Originally Posted by time4another

I am also wondering how this infectious cycle ends because its clearly not just the individuals loosing their homes (by whatever method) its *everyone*.

The cycle ends when there are more qualified buyers than there are "discounted" homes (or more accuratly people who are "motivated sellers").

The ONLY way to create that situation:
1) Decrease lending standards (what caused this in the first place)
or
2) Increase the number of responsible consumers (Takes a long time and is counter to the American cultural standard).
or
3) Decrease the number of homes available (natural disaster, long term capital investors)

We are currently in a baby boom (and there was one that ended in 1999), that generation will cause a housing shortage and almost certanly another housing boom/bubble, but that will not be untill the late 2020s or mid 2030s.
Untill then you can probably expect a reasonable housing market (i.e. not a "get rich quick" market)