Preserving Community Assets: Do Foreclosure Sales Need to Negatively Impact the Neighborhood?

Research has linked concentrated foreclosures with negative neighborhood outcomes; for instance, increased crime and decreased property values. These outcomes drain community asset holdings and impact the longer term trajectory of the neighborhood. However, data reported in this article from a Boston study challenge the assumption that negative neighborhood outcomes are a foregone conclusion in the face of foreclosures. Analysis of interviews with real estate agents and other foreclosure professionals, neighborhood ethnographic observation, and citywide sales and foreclosure sales documents demonstrate that the distinct nature of the foreclosure sales process creates market disruptions heightening the risk for documented negative neighborhood outcomes. Attempts by the seller to reduce financial risks in the sale increase the likelihood of vacancy and create a market oriented toward investor-buyers. Understanding the risk preferences of key decision makers in the foreclosure sale process reveals new intervention points--such as intervening at the short sale, or expanding and updating foreclosure laws to reflect current foreclosure sales markets--to reduce market disruptions and preserve community assets in the face of foreclosures.