Foreclosure vs. Bankruptcy: Which One Hurts Most?

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Foreclosure reduces the value of a home by 27 percent on average, according to a new study from Harvard University and the Massachusetts Institute of Technology.

Other kinds of forced sales have less dramatic impacts, the study found.

An estate sale after an owner’s death reduces the price of the home by only 5 percent to 7 percent. A bankruptcy filing cuts the value by an average 3 percent.

Foreclosure discounts are especially large in neighborhoods that are low-priced already, researchers point out, apparently because of concerns over vandalism.

Source: The Wall Street Journal, Nick Timiraos (07/26/2010)

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