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 is sweeping into these suburban neighborhoods as vandals, thieves, drug dealers, prostitution rings, etc move into abandoned houses.
This is a forgotten 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 appear, the garage door gets boarded up and signs indicate that the home is bank-owned. 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 and moulding, and using sledgehammers to pull piping out of the walls–you name it, it’s being taken. Other abandoned homes 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 or to criminals who set up shop in the home.
Let’s see how this happens:
1. 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 bank’s terms.
If the owners don’t leave then, they often wait until they get a notice of foreclosure proceedings and then leave.
So at this point, the home is abandoned.
2. Foreclosure gives the bank the ability to take the home as collateral for the mortgage. This can take six to 12 months. In the meantime, the house sits. It becomes attractive to vandals, the homeless, gangs, drug sellers, thieves, etc. This is outlined nicely in the BusinessWeek article, “Dirty Deeds.”
3. Ownership becomes an issue. Technically, in most states, the owner still owns the home while the lender decides what it is worth. The lender includes the legal costs of taking it through foreclosure (expensive), back unpaid taxes (a big problem right now), potential repairs if it can’t be sold as is and the value of the home. All of this is compared with the value of the loan. In many cities, the lender can’t break even. The lender stops the foreclosure process, and the title remains in the borrower’s name.
4. The home becomes a problem. It begins to affect property values across the neighborhood. Initial issues that become apparent are lawns turning brown and 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 that he or she thought the bank took the house back.
5. At some point, officials begin to expand the definition of who owns the home. In some states, prosecutors are taking banks that foreclose into court and seeking fines. If the house cannot be sold because it’s so badly damaged, it may be demolished.
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 bank officials going through a process rather than using their heads. The result affects property value throughout the entire neighborhood: Being within 150 to 200 yards of an abandoned house severely affects your property’s value.
Dani
