Foreclosure nightmare

[Iwillnevergiveup]

My friend, Ron in southern CA, lives next door to a house that was listed as a short sale at the end of July. No arrangements have been made for upkeep of the yard, pool and jacuzzi. The pool is actually pea soup now. He approached the realtor to mow and edge the front and back yards and keep the pool and jacuzzi filled with water for $60 a month. He was told the bank doesn't own the property and wouldn't pay for any upkeep. The owner, who is long gone, is actually responsible, but doesn't care. He has kept on the electric and water, so Ron has taken it upon himself to mow, edge and water the lawn and keep the water levels in the pool and jacuzzi where they should be. He figures even if he's not getting paid for his services, he doesn't want to see the property right next door lower his own property values.

[Iwillnevergiveup]

1. But I think

too many properties are just remaining vacant and untended.

[Johonny]

9. Too many properties

have houses on them that are way above the houses around them. Too many Socal cities were letting contractors snap up houses and then build a McMansion on the lot. When I go looking at houses mostly I see McMansions built in middle class neighborhoods that are at asking prices that no one will pay. So they sit empty...

[conscious evolution]

45. One in my hood in Atl

This one has never even neen lived in.Someone built it on spec.Five bedrooms six baths three car garage.Three story's next to two 1920's two bed onebath bungalows.
Been sitting empty for 3.5 years.
Its also condemned now due to lack of maintainance.Damned thing has to be torn down.

[Raven]

2. Same situation here in NH. There was a time when the owner

of foreclosed property got whatever was excess $ over the mortgage. It was an incentive to keep the property up. I'm not sure what happened to that rule but I'm told its gone. As a result we have properties that are in terrible shape, both inside and out. No one cares.

[AllentownJake]

7. There is no excess over the mortgage value

Is the most likely answer. Most houses that got mortgages in the last 8 years are underwater (i.e. home is worth less than the mortgage).

There is a phenomenon going on where homeowners who can pay for their mortgage payment are simply doing jingle mail because their house will never be worth as much as they owe on it.

[louis-t]

11. What do you mean "jingle mail"?

Anyone who decides to stop paying their mortgage simply because their house is "not worth what they owe" is contributing to the problem.

[AllentownJake]

12. That might be the case

but there is nothing to stop anyone from sending their keys to their mortgage holders and say foreclose on me.

This is what happens when you create an asset bubble, people who borrowed to obtain the asset will walk away when they owe more than it is worth.

[xiamiam]

17. unless something is done to stem the tide...that would represent the majority of houses in america

at the moment, it represents more than 25%

[AllentownJake]

20. Why do you think July, August, and September

had the highest foreclosure rates in history.

This is what happens when the government infuses the banks with cash and than changes the accounting rules to allow them to value assets at their previous value. The banks have absolutely no incentive to bargain with anyone. So instead of taking a $50,000 loss they will take a $250,000 loss and not sell the house, keeping the depreciated asset on their balance sheet and not recognizing the loss.

The Obama administration's approach to this problem is ridiculous. The DOW hit 10,000 on fake profits though so people are keeping quiet for now.

[louis-t]

26. I've had friends ask me if they should

do this. I ask "can you make your payments?" If the answer is yes, the advice is "stay put". The dumbest reason for walking away is that you're upside down. That is a psychological issue. If you can't make the payments, that is something different.

[AllentownJake]

31. You also have to include in this

people getting divorces, who 3 years ago could sell the house no problem. I know two divorced couples who did jingle mail and declared bankruptcy after trying to sell their house and not being able to find buyers. It was the easiest way to dissolve the marriage.

[louis-t]

34. What the heck is 'jingle mail'?

I have not heard this term.

[AllentownJake]

36. You take your keys

and you mail them to the mortgage company and say it's yours I'm not paying for it.

[lunatica]

38. People just leave and put the keys to the house in the mailbox

They are usually people who bought their houses during the end of the bubble when they were way overpriced. They don't get foreclosed because they're paying their mortgage, but their house has depreciated so much that they owe hundreds of thousands more than it's worth. They just walk away from it rather than continue to pay. It's happening a lot and mortgage companies are trying to spot these types of people. They are usually completely paid up on all their bills then just suddenly stop leaving the mortgage companies with the keys to the house

[louis-t]

39. Got it. I still think that is a stupid reason for

walking away from a house. "It's not worth what I owe." Even though most of the ones doing this probably got in for very little down.

[lunatica]

40. Well these people bought thinking they had a two income house

and that they could take on 3 or 4 thousands dollar mortgages, then one of them gets laid off and they can't make the payments anymore. If both get laid off then their best bet is to just walk away. Seen from another point of view they'll never get out of debt or be able to sell their house for what they're paying. And if they have children then they have to survive.

You might say it's foolish for them to have bought it in the first place, but they thought they could afford it. Anyone can get laid off nowadays, and all our houses are going down in value. My condo is and my mortgage company froze my credit line of equity so I can't use it anymore. I still have to pay it but I'm not allowed to use it. That's tough since I've used it in emergencies and to help me maintain my credit, always paying more than the minimum payment. Now, since they shut that door life is getting tougher.

[louis-t]

42. I have said repeatedly: "If due to job loss

or other financial problems, that is different." My point was, and always has been, regarding people who walk away simply because they are upside down and don't wish to pay for a house that is not worth what they owe. Some people have a problem with the concept. Anyone who has any equity in the home (or DID have equity) probably won't walk away. The ones who are walking probably bought with very little down.

[AllentownJake]

44. These aren't people who are on year 10 of their mortgage

These are generally people who bought houses between 2003-2007 at the height of the bubble. There are cases in Florida where a house which sold for $500,000 is now selling for $80,000.

Can't say that if I had a $450,000 loan on an $80,000 house I just wouldn't voluntarily allow it to be foreclosed on.

[louis-t]

47. Yeah, the upside down-ness is really bad in FL

AZ, NV, CA. I thought it was bad that my house went from $200,000 to $160,000 here in MI.

[AllentownJake]

49. The Sun Belt

Got hit the worse. In PA people are dealing with 20% declines on the value of their houses. It sucks, but it isn't the end of the world.

Areas that overdeveloped are getting destroyed. Not to mention that there has been a recent surge of issues of problems with the building materials used during the boom. A lot of these houses were built as cheaply as possible and the homeowners are facing repairs, increasing the walk away rates.

[AllentownJake]

41. It is a two way street

Wall Street made irresponsible loans, guess what irresponsible things will happen as a result of it.

I have no problem with it, seeing that Wall Street is doing everything they can to fight reform and the notion of negotiating with homeowners on a shared mistake is foreign to them. Fuck them. I hope every single firm who played these games goes broke despite the bailouts.

[sendero]

46. I couldn't disagree more..

... If I were stuck in one of those seriously underwater houses I would send in the keys in a heartbeat.

Why? Because it will be a decade at least before houses get back to 2005 prices, at LEAST. I'll be darned if I'm going to pay $300K for something that is worth $200K.

The question is not "can you make the payments?". The question is "are you making the best financial decision for your family"?

Another important question would be "can you make the payments if you lose your income for a year or two?"

[SoCalDem]

51. true, but every good gambler knows when to "fold 'em"

and that's what they are doing,,

[Warpy]

3. He's right and it's unfair

Expect the electricity and water to be shut off soon.

In the meantime, it's a good thing it's winter, but that stagnant water can still breed mosquitoes in warmer weather spells. It's also going to stink as the algae depletes the nutrients and starts to die. Some swimming pool shock treatment to kill the algae and keep it dead might be in order. It will also make the water inhospitable to mosquitoes. A call to the city or county might get him some help in that department, get that thing drained before it becomes a public health hazard.

The owner is probably between a rock and a hard place, with an unsellable property in California and a job elsewhere. He likely can't afford to pay even a measly $60/month to maintain the property.

[NashVegas]

4. Ron Should Look Into Squatters' Rights

In some states, if he continues upkeep for a required amount of time, he'll own it.

[xiamiam]

5. the property next door has already lowered his property value since the sale price will be the comp

if it sells...if it doesn't the bank will foreclose and then their sale price (which most probably will be less than the short sale price) will be the comp...

we are a community...one goes down...we all go down...the middle class will continue to be eroded until everyone gets it

[here_is_to_hope]

6. My skateboarding buddies will

come and empty the pool for free...

We have a condemned house next to ours, I do the yard bu only so my chickens can graze it.

[louis-t]

8. It's a tough choice. This is happening a lot.

Banks don't seem to care that letting the property go downhill affects their bottom line. If they take the property back, it will be worth much less. If they allow a short sale, they will get a lower offer. I've witnessed thousands of homes left without heat in MI in winter, mold, frozen pipes, house ends up worthless, because a bank refuses to keep the heat on. Hmmm, let's see, spend $2,000 to keep it heated or lose $40,000 in value. Banks keep making the wrong choices and we're left bailing them out and having our fees raised and credit limits lowered.

[Freeatleast]

14. You got that right

Banks are no help!

[AllentownJake]

22. The banks are all insolvent

The accounting rules have been changed so that they can keep property on their books at previous values instead of writing down the assets. They have no incentive to sell these houses, they will have to recognize a loss.

They are also cash poor. If they had money, believe me they'd be lending to small businesses. Problem is they don't have that much money and they are hoarding any cash they can to survive the above losses.

[louis-t]

24. They are "hoarding cash" but paying huge

bonuses? You're right, they have no incentive to sell, or do short sales. I thought the idea of the bailout was to increase lending to small business. At least that is what we were 'sold'. If they stopped the 'roadblocks' and would just sell the houses off, they wouldn't be as cash poor. The investors would whine about their losses, but the influx of cash would be tremendous. I have buyers willing to pay cash for these homes, but the obstacles are tremendous. Cash offers used to close in 10 days. Now it can take months. People get tired of waiting and decide not to buy. It has happened at least 10 times to me this year. This has cost me about $30,000 in income.

[AllentownJake]

29. Of course they are always going to give themselves bonuses

The bonuses are what got us into this mess in the first place. If the CEO can make 10 million dollars on a bonus this year or make 10 million dollars over 10 years of actually being a responsible lender human nature dictates people will take the 10 million this year.

They are delaying the inevitable and propping up false profits as long as they can and the government is aiding and abetting this behavior by changing the accounting rules and keeping secret who the really troubled banks are. The only time the government moves in is when they have absolutely no choice and a bank is about to default on its debt.


A cash sale is bad for the bottom line, it requires recognizing a loss.

[slackmaster]

10. Ron should refer the matter to his municipal or county code enforcement department

They can hire a contractor to do the maintenance, bill the property owner, and put a lien on the property if the owner fails to pay up.

[xiamiam]

13. right..like the counties have money to do this...get real...nt

[slackmaster]

16. Municipalities in San Diego County take those issues seriously

Neglected swimming pools in particular, because they become breeding grounds for mosquitoes.

It's worth a try.

[xiamiam]

18. counties in california are not getting the property tax revenue as these houses foreclose

when they sell at foreclosed prices, which in some cases is half of the previous tax value...prop 13 kicks in and the new taxes are much less...problem is that counties have budgets which far exceed current tax revenue...this is a mess...

[slackmaster]

28. Take my word for it, cities ARE enforcing codes in my area

A group of people on my street just complained about a barking dog problem up the hill overlooking our homes. The city's code enforcement team acted quickly and decisively. The barking has ceased.

Chula Vista has a big problem with abandoned properties with overgrown brush and neglected swimming pools. They're doing a good job of following up on complaints.

[louis-t]

15. Great idea.

[Iwillnevergiveup]

19. Get this: the realtor

lives only 3 blocks away from this empty house. He told Ron he never wanted the listing in the first place - the distressed owner begged him to list it.

[Greyhound]

21. Desperately trying to prop up the artificially inflated prices.

One of the many elephants we seem determined to keep dancing around.

[AllentownJake]

23. Dancing around

The Federal Government is encouraging this behavior with their policies.

[dembotoz]

25. saw somthing about putting carp in the pool

suppoesedly they eat the bad stuff and keep the pool cleaner.

[dugaresa]

32. the pool has to be completely free of chlorine and that includes the

city water used to keep it at level.

The other issue i have read about is that some of the fish that are used to eat algae and mosquito larvae (bigger concern) are non native and can mess up an ecosystem if not destroyed after used in these pools. In Florida they used these Amazonian fish that shouldn't be released into the wild and well we all know how reliable people are about this stuff.

[Xithras]

27. He could always do what my cousin is doing.

He took a "not my problem" perspective on the REO next to his house as it gradually became more and more trashed, and eventually partially burned. The police didn't respond to calls on the home, the bank wasn't interested in keeping it up, and the former homeowner was nowhere to be seen. Now that it's destroyed, the bank won't repair the property because the construction costs would far exceed anything they could hope to get out of it, so it has to sell as-is. Most loans today are FHA backed, and the FHA won't sign of on a loan for an uninhabitable wreck. So what did my cousin do? He recently put in a $20,000 offer on the house (it was worth over $250k at market peak). The bank hasn't rejected his offer, but they've been holding it for a month in the hopes that something better will come along. No matter how much they ask, he won't raise his offer, but they won't reject it either. They know, full well, that they may never see anything better. The value of the empty lot, according to the tax assessor, is $19,500.

If his bid is eventually accepted, he plans on simply bulldozing the lot, extending his fence, and quadrupling the yard space on his property. While this isn't a common practice inside of a city, his realtor did tell him that it isn't unheard of and that more people are doing it nowadays because so many homes have been wrecked. Local governments typically hate the idea because it guts the appraised taxable value of the home, but there is little they can do about it.

[Hepburn]

30. L.A. County?

There are mosquito abatement ordinances that might apply because of the pool.

:shrug:

[Iwillnevergiveup]

33. SO many good points

Ron is calling the city of Long Beach to see what can be done. He now regrets not having bought the house when it originally went on the market. It isn't that great of a structure to begin with - original owner paid $20,000 for it in the mid 50's.

[Hannah Bell]

35. An expose I read once re inner city properties; in some cases, there was

apparent conspiracy to tank neighborhood values, e.g. by big pockets outside investors buying up properties & letting them sit unmaintained & in some cases apparently facilitating entry by drug users, i.e. by leaving them unsecured.

I'm wondering, though, why an owner who "doesn't care" & has abandoned the property would leave on the water & power.

[AllentownJake]

37. There are laws

about turning water and electricity off. The time frame just hasn't been exhausted and the owner is probably not paying the bills.

[earth mom]

43. Why fill up the pool? Drain it. nt

[SoCalDem]

48. He needs to call the city. Most SoCal areas have special teams

to tend to these .. The Mosquito abatement program is involved (although the season is probably over now).. They find out who owns it and they FINE them for failing to keep up the property..

[kestrel91316]

50. He needs to contact LA County health department's vector control

people to make sure the pool doesn't become a haven for mosquitos. And no, they won't bill him. THey WILL bill the owner of record, I suppose.

http://glacvcd.org/

If he is not in that vector control district, there are others. Google is your friend.