The Home Sellers' Biggest Problems - part 1

A huge reason that so many home owners can't sell their homes is because of how homes are marketed, and not necessarily because of anything being "wrong" with their own home.

For some reason that continues to baffle me, all purchased home are lumped into a single statistical category, whether they are, to use the term, distressed properties or not. Let me put it this way. Suppose a current year $25,000 car was repossessed by the lender and sold for $10,000 to recover the cost of that specific loan. If you took "proof" of that sale and went to your nearest car dealer and attempted to buy that current year for $10,000 because "that's what it is selling for", do you think the dealer would come down that far with the price?

I don't think so, either. However, for whatever reason, realty agents and real estate appraisers fail to do that when it comes to homes. Worse yet, realty associations across the country openly support this.

You see, the home sales figures, home price trends, and other comparative statistics released each month to the news media, treat foreclosed upon homes and short sale homes in the same realm as a paid up home seller looking to profit or needing to move. These foreclosure and short sale homes are sold for amounts designed to cover the outstanding loan, and are really less, often significantly less, than the actual value of the home.

Suppose there is a development with 20 houses which sold new for $300,000 each a few years ago. Now let's suppose that three of the owners of those 20 houses all defaulted on their monthly mortgage payments, forcing either foreclosure or short sales. Investors bought those three homes. One at $160,000, another at $170,000, and the third went for $180,000 in order to satisfy the outstanding loan amounts.  Now suppose you own a home in that development, have made all of your mortgage payments with no problem, and get a new job that creates the need for you to sell and move to a different area.

Guess what? An appraiser and potential buyers will point out to you that the "average" home sale in your development within the past six months was for $170,000, which is the middle and average price of those three distressed homes. While you continue to pay the mortgage and successfully maintain your home. Perhaps you have upgraded to increase its value. However, if you sell your home at a more than $120,000 loss, you might even owe money to get it off your hands, when you haven't done anything wrong.

At the same time, based on those three so-called sales, the local real estate report will include how local sales are "up", based on those three homes in your development which were documented as having been sold. Let's say there is another foreclosure next month, and THAT house is sold by the bank for $200,000. Guess what? You'll have realty associations spreading the news that home sales in your neighborhood are UP 10% over three months ago. And guess what? YOU would still lose at least $100,000 in order to sell your home under those conditions.

THIS is what is happening in much of the country. Even though foreclosures and short sales should NOT count toward home sale statistics and pricing, they still do. And for whatever bizarre reason, realty associations publish the sales and price increase statistics every month no matter what the consequences. They seem to think this is a positive. It is not.

They must think that people actually buy and sell homes based on monthly and yearly comparative statistics.

However, this all ties in with marketing. Anything to tell people that home sales are up and prices are good for buyers, when it hides how many legitimate sellers, who can pay their bills, are being screwed by the foreclosures and short sales. That's why marketing is a problem. People are being made to think the market is better than it is, all because of distressed properties.