Many studies on foreclosures have collected information on individuals or families who experience foreclosure. Other studies have computed actual costs of foreclosure instead of the perception of foreclosure costs. Others have used aggregate data on foreclosed homes, as their unit of analysis. But no single study found has looked at the perceived financial cost and neighborhood effect of a foreclosed home in rural areas, neither have they used the next-door neighbors as the unit of analysis. This study fills this gap in knowledge by investigating how the next-door homeowners perceive financial and neighborhood changes because of their adjacent foreclosed home. The study used a financial and social scale as well as perceptions of foreclosures in general and about their neighbors’ foreclosure in particular to answer the research questions. An additional uniqueness of this study is that it was conducted in USDA rural designated areas.