Posted By Cliff Tuttle | July 17, 2012
Although there is a growing surplus of owners that would like to sell their houses, many cannot because there is negative equity. In other words, the mortgage balance is higher than the current fair market value. While some are forced to seek short sales, that guarantees that the seller will walk away with no cash. As a result, a large number of potential sellers simply stay out of the market. And that in turn, boosts prices. If there had been more sellers, competition would drive prices down. Here’s a report that discusses this trend.
This phenomenon has the same effect on assessments. Properties under water stay off the market. This deprives non-selling owners of comparable sales at true market value — lower than the mortgage in many cases. Short sales and sales by banks are often culled by assessors as not being representative of the market. Sometimes they are wrong — those low values ARE the market.
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