Is a Foreclosure Home a Better Deal than a Short Sale?

A recent article from the Tampa Tribune shows an alarming trend where displaced homeowners apparently have vandalized their homes as a final gesture of derision in the face of foreclosure.

While potential savings may seem somewhat higher with foreclosed homes (40% less than market value is the national average, but your local market may be higher or lower) as opposed to short sales (21% below market value on average throughout the US- again, local markets may prove otherwise),  the cost of renovation and repair on a foreclosure property may prove to be a more expensive proposition.  Also, lenders may opt to deny financing for homes that appraisers deem "uninhabitable".  Now that many lenders are looking more favorably on short sales, buyers should carefully consider a short sale.

Below is a copy of the September 2nd article from the Tampa Tribune: 

Foreclosed homeowners take out revenge on properties

TAMPA, Fla. – Sept. 2, 2011 – Some foreclosed homeowners are taking out their anger on the homes they are forced to leave behind, smashing holes in the walls, scribbling graffiti everywhere, leaving piles of trash and ripping out appliances.

More banks – facing a growing problem from trashed foreclosures – are opting to offer homes at big discounts rather than fix the repairs, which can send surrounding home values in the neighborhood spiraling down, experts say.

Real estate pro Nick Davis with RE/MAX Premier Group told the Tampa Tribune that he has seen some home values greatly diminish from foreclosed homeowners who have trashed it. For example, he recalls one home that would have fetched $250,000 back in 2006 during the housing boom that would now sell for about $75,000 because the former owners trashed it.

“It looks like someone took revenge,” Davis says about the home, which had holes in the wall, appliances ripped out, and piles of trash. “Unfortunately, we’re seeing more of this. We’ve seen cement in the plumbing systems, the air conditioners ripped out from the outside, wiring being removed.”

Some real estate professionals and lenders are even blaming the high number of real estate deals falling apart due to more homes being left in poor condition by the original owners.

Buyers “look at these homes and say, ‘If this is the damage I can see, what else did the homeowner do to this place that I can’t see?’” Davis says.

Some homeowners facing foreclosure place the blame on banks for their woes so they leave behind a mess for the bank. But trashing a home can backfire. Some banks are saying they may even start taking steps to sue homeowners for the cost of repairs, and law enforcement officials say homeowners can be charged with vandalism as well as theft if they remove items that don’t belong to them from the home.