Foreclosure Rates and Year Built
I'm working on a property tax appeal for town home lots near the neighborhood when I had made 3 unsuccessful offers on town homes. And my brain finally realized what my gut already understood: homes built from 2004-2006 have a higher rate of foreclosures and short sales.
I interviewed my client's salesman when I inspected the development for the tax appeal. “How are things going?”
“Great! We wrote contracts on 2 town homes last month.”
I then explained to the salesman that I was working for his employer to help reduce the property taxes. “Tell me what's really going on.”
“Well,” he launched into a long discussion. “I've been told to just sell the 10 remaining specs and models. That we are not building any more townhomes in this development. The competition from short sales and foreclosures is so intense that there is no profit in new construction.”
As I was doing research for the report, the light bulb went on. The attractive townhomes that are giving my client's new subdivision so much competition were built primarily from 2004-2006.
The years 2004-2006 were the height of “funny money mortgages.” Combine this with the fact that many buyers of 2 story town homes are first time home buyers. They wanted to get their foot in the door of home ownership. This is likely not their forever home. They are at an age where marriage, divorce, new babies and new jobs are more common than other demographic groups. They now need a different housing situation and are under water with their mortgage.
My initial thought about the attractive neighborhood I made the three offers in was that it would be one of the first to start to see home appreciation when the overall market improved. However, most of these town homes have mortgages originated during the peak of the problem years. Now I'm convinced the short sales and foreclosures will just keep coming-- and keep homes values down and put downward pressure on rents. And distressed properties don't pay their H O A dues, putting upward pressure on those, shrinking the landlord's profit margin. So I was right to listen to my gut when my enthusiasm waned the closer I got to closing.
In researching this property tax appeal for Pay 2011, I have uncovered some excellent data to support property tax appeals for most town home lots in the Twin Cities. If you are sitting on town home lots, please send me the development information for a free evaluation for property tax appeals. Just a sample P ID and your contact information to firstname.lastname@example.org.