We conducted an unscientific, teeny little survey of foreclosed houses last week ' precisely one house ' but given the figures we quoted earlier this week about the toll foreclosed homes are taking on cities, neighborhoods, and individual neighbors ' we are willing to bet that what we saw in Darien, Georgia can be extrapolated to portray hundreds of thousands of foreclosed homes nationwide.
And what we see is how the policies of lenders and their real estate agents are making the foreclosure situation worse than it needs to be.
The scenario: my daughter, an experienced renovator, spotted a foreclosed house for sale on the Internet and asked me to visit it with her. When she called the agent (an out-of-town agent with no other listing in Darien) she was told the house was unlocked; to see it at her leisure so we drove to Darien, a charming up-and-coming seacoast town where much private money has been spent upgrading Victorian and Craftsman era bungalows around a couple of vest-pocket versions of Georgia's famous Oglethorpe "squares."
Our target wasn't in that sort of rarified neighborhood, but rather smack-dab in the middle of a "mixed area." Starting next door and running to the east were nicely maintained and landscaped brick ranches of 1,800 sf or so. Starting next door and running west was a deplorable collection of trailers ' sometimes dropped three or four to a lot in violation of code, and few in decent repair. Our foreclosure had moved blight one address east.
As advertised, the house, a large ranch on an oversized lot, was open; an abortive home improvement project had left a gaping hole into what used to be a garage, making locking the front door a little futile. The plumbing appeared to be intact ' it wasn't copper ' but the electrical wiring had been stripped out of at least the "under construction" portion of the house.
Inside there was furniture everywhere. A broken table, china closet, and chairs in the dining room, a legless upholstered chair and couch in what appeared to be a family room; a queen-sized mattress on the floor in another room, and garbage everywhere. It appeared that the furniture had belonged to the previous owner but it is only a matter of time before squatters move in their mattresses and cots and do further damage.
The former garage which had been cut into a number of small rooms with unfinished partitions, was impassable, especially as the only light ' the power was off ' filtered in through the big hole and one or two tiny windows.
Nowhere in the house could I locate a card for the agent or a listing sheet containing any information such as the taxes on the property or its age. The agent's website had said "no representations," but come on ' the amount of the taxes? Save the prospective buyer a little effort ' Lord knows you are doing nothing else to earn your commission.
Seeing the house ' and driving around the small community to check the status of other vacant and/or foreclosed properties - raised a lot of questions.
Is the bank aware of what is happening to its owned real estate under the care of this agent or hundreds other like him? Does the bank make any attempt at property management?
Our guess is that the property was foreclosed by a large servicer located far away from Darien and once the foreclosure was complete the house joined thousands of others down in that crack they all were allowed to fall through. There is no doubt a department with nominal responsibility for property management but it is probably limited to locating a local broker and assigning the listing.
In the article we published last week on the cost of foreclosures we listed line items for clean-up, minor repairs, and property maintenance totaling 3 percent of the value of the property. Is this real money or only items that the banks claim to spend then charge against foreclosure losses so that they become tax write-offs? If so, isn't this fraud?
Was our real estate agent given any kind of allowance to cover securing, protecting, and maintaining the property or is he expected to cover all expenses out of his commission? Commissions in Southeast Georgia are generally 7 percent so the agent isn't going to make much even if he does sell the property before squatters burn it down.
But we are only talking about maybe $200 to board up the hole in the garage and install a new lock on the front door and maybe $500 to haul away the trash and leave the house "broom clean." Leaving the power on would cost only a few dollars a month and would improve both the security of the property and the safety of prospective buyers. A property that looks as though someone is taking an interest in it is much less likely to be vandalized than one that is obviously abandoned.
There is another villain to this piece. In addition to the owner and the agent, the town itself should take an interest in its decaying neighborhoods. The code enforcement division of city government could write up a dozen infractions of local ordinances (we didn't mention earlier that there is also an abandoned pool on the property) and hit the property owner with some fines. That would get somebody's attention in Charlotte or Des Moines. If local governments don't have enough clout to go after the banks, perhaps it is past time for the state legislatures to do so.
For example; in the early 1990's there were hundreds of foreclosures in New England and, because of the type of wild lending that had gone on five years earlier, these actions were focused on condominiums and were largely done by the Federal Deposit Insurance Corporation (FDIC) on behalf of failed banks. While they would never admit it, it was the FDIC's policy to ignore the homeowner's associations and their fees. In some complexes the numbers of FDIC owned units soon topped 60 percent and the cash strapped HOA's, unable to fix leaky roofs or even pay for master insurance policies began to sue FDIC unit by unit to collect past due fees.
Then someone got the idea to approach the Great and General Court and within months the Commonwealth had a senior lien law that permitted HOAs to lien units for unpaid fees. These senior liens could not be wiped out by a foreclosure and the HOA could itself foreclose on its lien and eliminate the first mortgage on the property. The FDIC was suddenly very interested in paying those fees and the law went a long way to stop the deterioration of the condo complexes.
If the states did the same ' giving senior lien status to fines for unsecured or unsafe buildings for example ' it would give the cities and towns a potent weapon to use against lenders in preventing further deterioration to neighborhoods.
In the meantime, we are still amazed that banks are willing to allow their owned real estate to deteriorate to the point of having no value rather than spend a few thousand dollars preventively and that there are real estate agents out there who have so little pride in their services.