September 03, 2019
NMSA Recommends Foreclosure Cost Remedies
When a home goes into foreclosure and is subsequently left vacant for a duration, numerous costs are likely to accrue to the mortgage-holding institution. According to a white paper by the National Mortgage Servicing Association on the subject of how foreclosure leads to community blight, these costs may be remedied by adoption by the industry of some fairly simple practices.
Particularly when foreclosures are in a cascade of occurrence—as in the 2007-2008 financial crisis—the likelihood of potential buyers showing up to purchase vacant foreclosure properties is low. This means homes are likely to sit vacant for an extended period of time, and, under the current regime, to fall into disrepair.
This goes beyond the first-blush concept of vacancies (long grass, maybe a bit of paint flecking off). According to the NMSA’s “conservative set of assumptions,” a property sitting vacant can lead to losses of around $150,000 in the first year alone. $133,000 of this loss comes in the form of diminished property values for the homes surrounding the vacancy. Around $14,000 takes the form of increased crime in the area, and $1,500 goes toward increased costs for the fire and police departments. And every further year the property sits vacant, these latter costs gain in amount. Even once a formerly-vacant property sells, the neighbors will lose around $25,000 in property value for at least two years.
It isn’t the foreclosure status that drives these decreases in value, but the vacancy. Boarding windows, for example, gives a sense of the property being likely to remain vacant for a long time, which puts people in the mindset that the neighborhood is on a downward trajectory—it invites criminal elements to illegally enter and occupy the dwelling, and in fact greatly increases the likelihood of the home burning down.
According to the NMSA, a simple solution to this problem is to form a regime in which the vacant status of a property is obscured. To take on relatively low-cost property maintenance costs in order to save money in the long run, and keep a neighborhood from falling into blight. In fact, according to this white paper, the property’s value might even increase in this case, since a vacant property that is taken care of may even achieve a better condition than one being lived in. In which case the lender, the neighborhood, and an eventual purchaser all win.
Whether you’re looking to buy in Westchester, Massachusetts; West Palm, Florida; or Newport, Rhode Island, you’ll need to make sure your new home is not threatened by defects in your ownership of title. At Topouzis & Associates, P.C., we delve deeply into the history of your properties—including foreclosures—in order to ensure that your property ownership will not be hindered by past issues; and we provide the Title Insurance to back our assessments. Contact us to ensure that you are covered in case of surprise.