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Vacant Property in Foreclosure: Some Thoughts on the Process

Posted By USFN, Tuesday, September 12, 2017
Updated: Monday, August 28, 2017

September 12, 2017

 

by Robert Klein, Founder and Chairman 

Safeguard Properties (and Community Blight Solutions) – USFN Associate Member

Foreclosure is a necessity that scares the homeowner and gives the bank a headache. The mortgage counseling, incentives, and pre-screenings that are available in today’s homebuyer market can be helpful; ultimately, though, some foreclosures are bound to happen. When a foreclosure occurs, it can spell trouble for a neighborhood and trigger a demand for action.

For several years, states have grappled with the prospect of streamlining the foreclosure process, while ensuring protections are in place so that foreclosure is a last-ditch measure. This was to keep the social contract of home ownership solvent. Yet, once the decision has been made to foreclose, steps should be taken promptly to close out the property and allow it to re-enter the housing stock. At the end of 2016, states like Ohio, Michigan, and Florida led the country in vacated housing — with more than 80,000 vacant or abandoned homes and condominiums, each. Today, millions of homes are wallowing in the foreclosure process.

The longer a property sits vacant on the market during foreclosure, the more opportunity there is for its condition to worsen. Many community advocates and researchers have shown that buildings (particularly those boarded up) become beacons for crime. All the more reason that the burgeoning clearboarding movement is important as the “foreclosure/security” bandage, with the fast-tracking of a foreclosure to be the follow-up procedure. That’s why fast-track foreclosure laws like Ohio HB 390 and Maryland HB 702 came into being to swiftly address only vacant and abandoned homes.

The housing and mortgage service community relies heavily on one person to shepherd the process: its attorney. In Nevada, it can take more than 500 days to foreclose on a home following a 90-day delinquency, and that’s before any restoration or preservation can happen. The existing system calculates to an automatic six percent loss in value to the banks. This is a perfect example of the benefit brought by the lawyer who can quickly restore that property to saleable condition. With the combination of enhanced enforcement and efficiencies in technology to monitor and protect properties, it is the legal process that can ultimately determine whether an abandoned property drags an entire neighborhood down with it.

“Some of the mortgage companies today want these [properties] to be turnkey and are doing complete rehabs,” says Bob Hoobler, of RE/MAX 1st Advantage. “Once they foreclose, they want them to sell fast. They don’t want to have to sit on that asset.” As mortgage companies deploy assets to maintain and preserve properties, they want to protect their assets with quick, decisive legal turnaround to sale.

 

When a foreclosure happens, the home needs to be secured; the lawn needs to be cut, and the utilities need to be shut off. Neighborhoods suffer because homes are vacant; there is a loss to the local tax base. Municipalities whose schools rely on real estate taxes suffer. Maine’s foreclosure crisis recovery, for example, lags 10 percent behind national averages — with the typical foreclosure taking nearly two years. With the advent of fast-track foreclosure legislation, coupled with attorneys who can process it, Maine has the potential to catch up to the rest of the recovering national trend.

Foreclosures in the day-to-day life of the mortgage industry should be few; but if the fabric of America’s homeownership is to remain intact, foreclosures that do occur need to be quick, clean, and mistake-free. The front-line soldiers in the effort to maintain a balanced and fair housing market are foreclosure attorneys, and an efficient tool can be the fast-tracking process. Through fast-tracking and a solid understanding of efficient protocol, the legal processes help communities recover from the consequences of “zombie” properties — or better yet, avoid them altogether. After all, the goal for any responsible community should be going from foreclosure to property protection and re-sale as seamlessly as possible.

© Copyright 2017 USFN. All rights reserved.
September e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

 

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