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Long Island Foreclosures: Long Island Hardest Hit

I have been plugging away in the past month about Long Island foreclosures. The recent article in Newsday entitled, Mortgage Defaults on LI Among Worst In State puts things in perspective.

What’s happening is astounding and I really believe that homeowners have no idea what’s in store down the road. The main “theme” of my content for homeowners is, if you want to or need to sell, now is the time. I know this is like a dull drum beat for those of you who frequent my website, but it’s just the truth.

But it’s the truth that I don’t think homeowners are hearing. I know many different people who really need to sell. They want to move on in their lives but just “can’t give their home away.”

It’s not about “giving it away.” This real estate market from 2002 through 2006, helped people acrue an unbelievable amount of equity in their home. And while it’s hard to swallow a 30% reduction in that equity, it’s better than the alternative (losing another 20% over the next 12 to 18 months).

With 5.2 million nonprime mortgages (meaning these are the mortgages that were written to less-than-perfect buyers a few years ago) still outstanding and facing foreclosure, we here on Long Island will be hit hard by a certain percentage of those homes. And one thing that’s not mentioned in this Newsday article is the rate at which prime borrowers (the best borrowers) are defaulting on their mortgages.

With unemployment on Long Island increasing to nearly 8%, foreclosures are going to riddle this market. As more foreclosures come to bear down on the market values of homes, the trend in the appraisal business to set market value at foreclosure levels may have an extremely damaging impact on “regular” home values. How?

An appraisal is all about comparisons looking at what’s sold in the area. As an agent who performs Broker Price Opinions for banks, I see more and more, that I need to use Bank Owned Properties as a means to measure a home’s value in any given area. From West Islip to Greenport, New York, I’m doing bank appraisals and consistently needing to drop the price values on homes to conform more with foreclosures (because that’s what’s selling).

Traditionally, an appraisal of home value didn’t focus or even include a bank-owned property, because that’s not a “normal” sale. It’s a distressed sale. You dont’ compare the two. However, in this market, with articles like this in Newsday, and agents like myself who know what’s going on, we’ve got a problem that, unfortunately, is going to continue getting worse before it gets better. The trend is for home values to begin following bank property sales because the entire market is in distress.

(c) Copyright 2009
By Thomas McGiveron, Licensed Real Estate Salesperson