Occupied Foreclosures Harming Home Prices

Agents have a new challenge when selling a property near a foreclosure, especially if it’s still occupied.

A new study found that foreclosed homes with occupants can bring down the prices of nearby homes for sale twice as much as vacated properties. Chalk it up to another negative ripple effect of the foreclosure glut in this country.

Homes sold with at least one vacancy within 500 feet were priced 0.8% lower on average. An occupied, tax-current home that recently entered foreclosure lowered the sales price by 1.8%.

“The impacts of homes with multiple indicators of distress are larger than the impacts of homes that are only vacant, delinquent or recently foreclosed,” the researchers said in the report.

The findings of occupied foreclosures hurting prices more than vacant homes spotlights the underwhelming performance of private and public programs to assist homeowners before foreclosure and the need to more strongly enforce improvements in these initiatives.

Apparently, the Obama administration is working on plans to address both homeowners in danger of foreclosure and the inventory of already repossessed homes. We will wait and report on the details when they are announced in the next few weeks.

Have you noticed this phenomenon in your market? Do occupied foreclosed homes bring down prices? How much do foreclosures – occupied or not – affect home sale prices in your area? Please share your experience.