About Some Fundamentals Found in Foreclosure Listings

By: philip smith

It probably makes a great deal of sense to you that Foreclosure Listings and the Internet were a marriage made to last. After all, the contents of the database and the search features most commonly sought were easy to define, and in a way just replaced the manual systems used for a century, the old box file cards, and grew in all directions from there. Most of us love the flexibility of the many search features, but I don't know about you, I like to know how some of the obviously estimated data was derived.

Equity percentage for example, how is this calculated and why is it important to a potential investor in a foreclosure home? This percentage is the share of the property's worth that truly belongs to the owner, or the value of the property minus the amount of debt secured against it, expressed in percentage terms. Equity in one's home is built up as the mortgages are paid down, and by market price appreciation. Its importance in foreclosures listings is to an investor seeking the better bargains. If he chose to buy the foreclosure at the listed price less buying and selling costs, and sold on immediately at the market price, he has made a net profit equivalent to the equity percentage value. Most pre foreclosures with seller equity are likely to avoid the auction sale. The owner/borrower may be able to refinance and pay off the arrears either directly with the lender foreclosing or through a new lender, or sell the home at a price below fair market to an investor. This search information helps the investor pick his best leads. Remember it is only an estimate, and the buyer must search title to confirm the total loan information disclosed in the site is complete and correct.

Another detail provided on most reputable listing sites is 'Assessed Value.' How and where is this information obtained and can it be relied upon? Well, there is the Tax Assessed Value. That's the value established by local authorities for property tax calculation purposes. In some states that might be a standard % say 70%, of fair market value. There's Appraisal Value. A Licensed Property Appraiser uses an acceptable method to give a value estimate. The most common method for family homes is the Comparison Sales method, where the value is based on recent sales of similar properties in the same area, comparable not only in size, features and amenities but also in quality. The comparison sales prices must be adjusted to counter for the effect of distressed price selling. This information is required for traditional real estate buying purposes, but in the case of a foreclosure property must be tested, supplemented and analysed rigorously, for it is obvious that the 'comps' may not be 'fair market' value.'

Online foreclosure listings are fundamental to making informed decisions, aren't they!

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