How much do foreclosures affect neighborhood home values?

I believe it depends a lot on location.

If a foreclosed home enters the market in a neighborhood where demand is high and supply is low, then the impact of that foreclosure on neighborhood home values will be relatively small. When the foreclosure sells, the lasting effects will be minimal because there are no other distressed properties on the market after the sale.

It's a different story on the other end of the spectrum - when a foreclosed home enters the market in an area where several other foreclosures already exist. When supply is high, and much of the inventory comes from distressed sellers, the impact of those foreclosed homes on neighborhood home values will be noticeable and real.

If you're getting ready to price your home, your Realtor can help you gain a better understanding of the foreclosure and short sale inventory in your neighborhood. You'll also find these articles on the DaneCountyMarket.com selling real estate page useful:

• Market value versus assessed value in Madison
• Understanding price trends in your neighborhood
• Pricing your home