This year will likely be remembered in Atlanta real estate circles as a year of change.
Change for the better in that values have apparently bottomed out in our market area and are starting to rise, according to sources. And change for the worse as the flood of bank-owned homes continues to poison otherwise healthy neighborhoods with ultra-low-price sales and low-ball purchases.
Selling these homes for whatever they can fetch may be the cure for the lenders who end up with them, but they result in lowered values for the surrounding neighborhood. And still there is no source of mortgage money for the many investors who would otherwise buy these homes at higher prices but necessarily offer less for a cash transaction.
The new challenge is the gradual increase in lenders’ acceptance of short sales as a way to stem the foreclosure tide.
In a typical short sale, an owner facing foreclosure agrees to sell his house in exchange for being released from the loan obligation. Receiving no other compensation, he walks away and avoids a foreclosure action. Simultaneously, an investor offers to buy the house from the lender at a much lower price than the mortgage balance.
The lender eats the loss but avoids the prospect of owning and marketing the vacant house. By limiting its loss, the lender saves money in the long run. And lenders are finally warming up to the practice.
However, because these same lenders will not offer new financing to even well-qualified investors for these purchases, they often drive down the prices a cash investor can afford to pay. Once again, this challenges any thought of re-establishing property values in many Atlanta neighborhoods.
Adding salt to the wound is the appraisal practice of considering these distressed sales to be comparable transactions in establishing market value.
Yes, there are promising signs in our current economic picture. But on Main Street, the twin enemies of homeowners are short sales and bank-owned home giveaways. These are the toxic assets our leaders in Washington need to be concerned about. These, and the lack of available mortgage funds, must be addressed before we can look for a full recovery of the housing market in many parts of the country, including metro Atlanta.
John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920 AM) every Saturday at noon. For more information, visit www.money99.com.
About the Author
Featured
