Tax Impacts of Bank Foreclosed Homes for Sale, Short Sales

by Peter Vernon on States

The large volume of bank foreclosed homes for sale in Lee County, Florida is affecting taxable values of properties, according to Ken Wilkinson, a property appraiser.

He said that Lee County has become a hot bed of bank foreclosed homes for sale. He noted that three years ago, foreclosed sales average 74 per week. But now, the weekly average is more than what it was three years ago.

In Lee County, for the 2008 tax period, more than 80 percent of home sales were short sale deals. Short sales involve homeowners, with the approval of lenders, selling their properties for less than the total mortgage they owed. Under this deal, lenders are willing to accept whatever the sale amount of the property, as full mortgage payment.

Wilkinson said that short sales are considered arm’s length transactions. This means that potential buyers are aware that they are going to get good bargains from arm’s length deals. He explained that with the growing number of bank foreclosed homes for sale, the taxable value in Lee County is expected to go down by 22.71 percent.

He said that he could not tell for sure if tax values of properties will continue to go down. But he said that the real estate market is trying to pull itself up from the lowest end by using cash sales.

Meanwhile, Wilkinson said that Lee County leads all 67 counties in Florida in terms of decrease in values, dropping by 25 percent equivalent to $25 billion. He pointed out that in 2005, during the peak of the housing market, property tax values in Lee County increased by 33 percent.

On the other hand, Wilkinson analyzed why Collier County did not experience the big drop in taxable value that happened in Lee County. He said that it helps that Collier County has more high-end properties than Lee County, adding that areas with beaches are not as affected by foreclosures as Lee County.

He noted that a neighborhood that transforms itself into a rental area will find out that the move could bring down the overall value of properties. He explained that people living in areas with a great number of bank foreclosed homes for sale, do not have the ownership pride anymore and this attitude could bring down the entire neighborhood.