The foreclosure crisis isn’t picky. In fact, the housing market saw a 335% increase in foreclosures among million dollar homes in 2010. Once the homes of the rich and wealthy, many of these big properties are becoming a big risk for lenders when homeowners default.
The high end housing market hasn’t been able to scathe by the impact of the economy or housing market slump. Most million dollar homeowners are assumed to be more financially prepared or able to withstand tough times, but foreclosure filings are showing that simply isn’t true. No more immune to a suffering job market, family problems or dropping home values, million dollar homeowners face unique challenges when mortgage debt becoming an issue.
When a million+ dollar home ends up in foreclosure, many of the common problems associated with a foreclosure become amplified. First, the homeowner may work to resolve their debts through a loan modification or short sale, but the lender is not always willing. Even a small reduction in mortgage payments costs the lender thousands.
Next, if the home does end up in foreclosure the surrounding neighborhood stands to take a significant hit to home values. Because foreclosures are less common among high end properties, a single foreclosure can cost the neighborhood millions in dropping home values.
Last, the lender has quite a chore on their hands if they walk away with the foreclosed property. The lender have to sit empty on a high loan for a long period of time, mostly because million dollar properties don’t sell well through bank auctions. With a limited buyer market, foreclosed high end properties don’t sell quickly.