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Monday, January 21, 2008
Abandoned Homes cause BIG problems
 With the wave of foreclosures hitting lenders, there is a new problem on the rise - houses abandoned by banks AND homeowners, and people left on the block getting hit with substantial value decreases as a result. An intense amount of crime sweeping into these suburban neighborhoods as vandals, thieves, drug dealers, prostitution rings, etc move into abandoned houses.
This is a forgotten, misunderstood component of foreclosure. Fights and legal battles are ensuing all across the nation about just who is responsible for these homes in limbo, being left to vandals and worse.
There are obvious signs that a home has been abandoned. The grass turns brown, eye-level weeds, the garage door becomes boarded up, signs indicating the home is bank owned - no trespassing... in some really bad cities, owners write "no piping" or "no aluminum" or "PVC only" because vandals are ripping the houses apart, bringing in trucks to haul away appliances, copper wiring, take piping out of the walls using sledge hammers, take moldings, anything metal - you name it, it's being taken. Others are being turned into indoor marijuana farms.
Also, squatters begin to make fires in the homes to stay warm as it gets colder, sometimes burning them to the ground.
Other homes are being left to drug dealers and vandals, criminals running prostitution rings in the home and setting up shop.
Let's walk through it a bit to see how this happens.
- First, the owner gets a notice of default. The owner often leaves the home - right then. Owners often would rather leave on their own terms than the banks.
If the owners don't leave then, they often wait until they get a notice of foreclosure proceedings.. then leave.
So at this point, the home is abandoned.
- Foreclosure gives the bank the ability to take the home as collateral for the mortgage. This can take 6 to 12 months. In the meantime, the house sits. It becomes attractive to vandals, homeless, gangs, drug sellers, thieves, etc. This is outlined nicely in Business Week.
- Ownership becomes an issue. Technically, in most states, the owner still owns the home while the lender decides what it is worth. They include legal costs of taking it through foreclosure (expensive), repairs, back unpaid taxes (a big problem right now), potential repairs if they cannot sell it as is, and the value of the home. They compare all of this to the value of the loan. In many cities, they cannot break even. The lender stops the foreclosure process. The title remains in the borrower’s name!
- The home becomes a problem. It begins to affect property values across the neighborhood. Some of the initial issues that become apparent is the water being shut off and lawns turning brown, pools turning green. Housing inspectors check property records and cite borrowers for violations, which can lead to fines and jail time. But, the borrower says in court he or she thought the bank took the house back.
- At some point, officials begin to expand the definition of who exactly owns the home. In some states, prosecutors are taking banks that foreclose into court and seeking fines. If the house cannot be sold as it's so badly damaged, it may be demo'd.
Some ask, if the bank won't take care of the home and won't get any money from the home, why not let the owner continue to live in the house and at least take care of it until it can be sold on short sale? Good question. It seems a case of banks going through a process rather than using their heads. They affect property value throughout the entire neighborhood; just being within 150 to 200 yards of an abandoned house severely affects your own property value.
Dani
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