Home Foreclosure Auctions: The Biggest Advantage and Disadvantage of Them

Home foreclosure auctions are good news for some, but bad news for others. Here we take a look at the biggest advantage and disadvantage of them.

The Biggest Advantage of Home Foreclosure Auctions

Obviously, it’s a deal for the buyer — this is the biggest advantage. But those in the community benefit as well — on several fronts, ie:

Removes Crime Threat: The longer a foreclosed property stays vacant, the more of a crime magnet it becomes, as discussed in the post here, How Foreclosure Cleanup Companies Are Keeping Neighborhoods Safe.

Raises Property Values: This is a long-range benefit. But, the more foreclosed homes are sold — whether at auction or not — the more home prices can stabilize and then start to rise. As long as there is a glut of foreclosed properties on the market, home prices continue to depreciate, as discussed in this news report on the advantages of home foreclosure auctions.

It features a California community where “foreclosures and short sales (homes that are not yet in foreclosure but are being sold to prevent foreclosure) represent close to 50 percent of the region’s real estate market.”

Keep these positives in mind when you hear all of the disheartening news about home foreclosures.

Now, for the bad news . . .

The Biggest Disadvantage of Home Foreclosure Auctions

When someone loses their home to foreclosure, it affects not only the property owner at hand, but the community as a whole. Why/how?

Because homes are appraised based on what the homes in a given area — uusally a 1 to 3 mile radius — have sold/can sell for. So when someone comes along and pays $100,000 for a home at a foreclosure auction, but you paid $150,000 for yours just four years ago, it drags down the value of your property as well.

So the biggest advantage is that - in the short run (which can last for a few years) — foreclosures in the community drag down the property values of the surrounding homes. For how long depends on a number of factors, eg, the economy, the housing inventory, amenities in a community, etc.

But again, this is usually temporary. Housing prices usually do bounce back. How long you’re prepared to ride it out is the real question as to how deeply you’ll be impacted. If you love your home and don’t want/need to sell it, while it’s losing value definitely is not something you want, it’s not something you’re likely to lose a whole bunch of sleep over.

BUT, if you need to sell it for any reason — a move, downsizing for retirement, to pay off medical bills, etc. — it can definitely cause a lot of sleepless nights.

As with anything in life, it’s a matter of perspective.

P.S.: Start a Business Cleaning Foreclosed Properties. While the foreclosure crisis has been a nightmare for many, it has presented a perfect small business opportunity for others. Learn how to start a foreclosure clean up business.

Copyright © 2010 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.