Foreclosures Reduce House Prices by 27%

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A foreclosure reduces the value of a house by 27%, on average, and accounts for a much steeper price drop than other forced sales, according to a study by an Massachusetts Institute of Technology (MIT) economist and two Harvard University researchers.
In comparison, when a house is sold after the death of an owner, the price drops 5% to 7% on average. When an owner declares bankruptcy, the value sinks 3%, according to the report. The research, “Forced Sales and House Prices,” has been accepted for publication in the American Economic Review.

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