The foreclosure crisis hasn’t just pummeled middle class America, even the upper class as felt the wrath of a sputtering mortgage lending industry. More million dollar homes are in foreclosure than ever before, bringing new challenges to the banks who own those multimillion dollar mortgages.
Big Mortgages, Big Problems
Defaulting on an average sized, moderately priced home can be detrimental to the homeowner and surrounding neighborhood alike. Dropping home values, problems with property maintenance and crime are all common side effects of even a single foreclosed home. However, the effects of a defaulted and foreclosed multimillion dollar home can be even more devastating.
For one, lenders have a much harder time offloading a million dollar foreclosure. With fewer buyers at this price point, a foreclosure in this price range can sit for years before it is ever sold or auctioned. Further, investors stay clear of high priced foreclosures as they are looking for cheaper homes to flip, turn into rentals or even tear down for rebuilds.
A single foreclosure in the $1million+ price point is also far more detrimental to the local real estate market than a moderately priced homes. Homes in this price point are likely to be significantly affected by the drop in value resulting from a nearby foreclosure, leaving the market vulnerable to huge losses when comparable homes of this caliber are sold. A 10% drop in value on a $200,000 home is only a $20,000; compared to the $200,000 buyer savings when a $2million home suffers a 10% drop in value.