What does foreclosure do to property value?

When foreclosed homes are sold they are often sold at significantly reduced prices. Any time homes in an area are sold for prices lower than previous sales in that same area, the property values of all similar homes in that market area decline.

Many people mistakenly believe that if they sell their home under normal circumstances that foreclosure sales do not affect their values. Home sales are much like any other consumer transaction; items selling for lower prices in a market reduce the value of similar items regardless of sale reason.

Distressed or damaged homes, while not similar in condition to maintained homes, will still drag down market values overall even though a maintained home will still sell for a slightly higher amount.