Upcoming Foreclosures

Home inspection, are local foreclosures really an issue when refinancing?

I'm trying to refinance my home I was told that I wouldn't be able to because of the foreclosures in my neighborhood. I've looked into home inspections and can't find anything that talks about a homes neighborhood. Are local foreclosures really an issue when refinancing?

Public Comments

1. What happens is the homes are foreclosed & sold for less than regular market value. This affects your value since the appraiser has to value your home based on similar home sale prices in your area.
2. yes because the appraiser will use those as comparable sales. so your home's value will be much less than if those foreclosures had not occured. those foreclosures have caused the value of your home to decline (hopefully temporarily).
3. Of course they are. I think you are talking about an appraisal rather than an inspection. If your neighborhood has a great many foreclosures, the value of all the homes in the neighborhood goes down, and you may not have sufficient equity to refinance your home.
4. Yes, because when the appraisal is done they use the most recent sales on properties in your neighborhood as a comparison. If there are a lot of bank owned homes, the value of the neighborhood will decline. And also because there are so many foreclosures, the bank might see your neighborhood as a high risk loan area. Also, just generally home prices have fallen everywhere.
5. As long as the refi is 80% or less of the value of your home today, neighborhood foreclosures are not an issue. A bank or mortgage company can not deny you the right to apply for a mortgage, due to the amount of foreclosures in your area. (That is redlining, and they face stiff penalties for doing that). If however the foreclosures have lowered your proerty value to the level where you are financing more than 80%, they can turn you down. this is after you have paid all the app fees, and costs for an appraisal.
6. Keep looking. Go to a mortgage broker who can shop several different banks at once. Unless you live in a reeaaally foreclosed area, somebody will give you a loan. However, make sure you carefully read the terms of the loan to make sure you get decent terms and rates.