Chicago Sun-Times: Your Neighbor's Foreclosure Just Became Your Problem

[marmar]

August 1, 2010
BY DAVID ROEDER
Business Reporter/[e-mail]


That house down the street that just went into foreclosure wasn't just bad for your neighbor. It's gnawing at the value of your own home.

Sales figures show that foreclosed homes generally trade for a 40 percent discount compared with homes sold the conventional way in the same market. In many cases, the discount is far more.

Michael Walsh of Elmwood Park's Citywide Services, an appraiser, said some banks that have held foreclosed homes drastically undercut the market when they finally let go. "They want to get whatever will get rid of the property in 60 days," he said.

His trade calls for finding "comparable sales" in a given neighborhood, and he said that's no easy task when there's a preponderance of bank-owned real estate, called REOs, or short sales.

When a lender lets a homeowner sell for less than what he owes on the mortgage, that's a short sale. It's a step up from a foreclosure, with the difference being that in a short sale, the home is still occupied and presumably in better shape.

He sees different issues depending on location. In formerly hot city enclaves, anyone selling a home the conventional way "is competing with a lot of short sales and REOs, many of them recently rehabbed," he said. A hike in foreclosures on the Near North Side, for example, shows more upscale condos with bad loans. ............(more)

The complete piece is at: http://www.suntimes.com/business/2553792,CST-NWS-fore01.article

[MineralMan]

1. There's another side to this coin.

The house next door to mine was foreclosed. We share a driveway. The lender wants an exorbitant amount for this house, so it hasn't sold. It needs a rehab, in the first place, and it's not getting any better sitting there empty.

It's been vacant for over a year, now, and nobody's looking at it any longer. A vacant house, sitting next to yours lowers your property value even more than one that was sold for less than your house is worth.

I'd much rather have a family living in, and maintaining that house, whatever price it sold for, than have it standing empty.

Worse, we need a new driveway, and paving half of a shared driveway doesn't make any sense, so we're stuck until someone buys the house.

If the price was reasonable, I'd consider buying it myself, rehabbing it myself, and selling it. It's not reasonable, and the lender isn't interested in lower offers.

[exboyfil]

2. Have you made a formal offer?

You might want to try a reasonable offer that is a little padded to your side. It might get the bank to move on the property.

[MineralMan]

3. A number of people have made formal offers on the place.

All have been rejected by the lender, or whoever has title to the place. I'm not going to do it. It would be a desperation move on my part, and I'm not that interested in rehabbing a house at my age. I'd do it if it were the last resort, but I don't really want to.

The price they're asking is actually outrageous, considering the condition of the house and the current market. I'm not sure what they're about with this. It may be that the actual lender that owns the house is nowhere near the area. I've talked to the broker who's listing it, one who specializes in foreclosures, and he seems pretty uninterested in the property and moving it. I suppose he's getting a monthly fee for dealing with it, and that's probably enough for him.

There are lots of houses in that situation in Saint Paul. I'm considering contacting the city about it to see if I can get it declared an "abandoned property." That designation might just get the lender to deal with it, since it drops the value dramatically. Nobody wants to buy such a home today. There are just too many hoops to jump through. After a certain period, the city can order the house demolished. It's another last resort, though.

Saint Paul has a few hundred houses in this situation, with lenders/owners who are dragging their feet on dropping the price enough to sell them. There are many, many short sale opportunities in the area, too, and those are actually moving pretty well. Most buyers would much rather buy a house that has an existing occupant than one that's been sitting empty for a year.

It's not that this neighborhood is full of such houses. In fact, this is the only one anywhere nearby that isn't owned or rented by someone living in the house. It's an aberration.

[drm604]

5. Can you take the lender to court over the driveway?

Don't they have some legal obligation to participate in the upkeep of something shared like a driveway?

[MineralMan]

15. No. Shared driveways aren't that sort of issue.

It's really just a double-wide driveway. I could re-pave my half, but I think that's silly. I've even seen fences down the middle of these. I'd prefer to work with a new owner or the current owner to come up with a plan for a re-paving. The lender isn't going to be interested in this. They're almost not even maintaining the lawn, etc. I'll just wait. I really can't afford it right now anyway.

[noamnety]

11. If I were next to an abandoned house

that had been sitting empty for any length of time, I might be tempted to take over their yard with a vegetable garden.

[MineralMan]

16. Not worth the hassle. Not legal, either.

[dkf]

4. Why do we want housing to stay so high?

If you are going to live there forever then an expensive house just increases your property tax. Maybe the point is that housing shouldn't be so expensive. Having a house with a large value only tempts people into using it as a piggy bank which increases the chance you will lose it.

[w4rma]

8. Good question. If the elite won't allow us to be paid more, then housing prices *must* come down. nt

[dionysus]

10. not so much wantin it to stay high, it's finding your house isnow worth less than what you bought it

for...

[HillbillyBob]

6. Our house and land were for sale for 45% below market

and below appraised. The previous owners did not 'lose' it they just walked away and it was vacant after the renters were busted for turning it into a grow house, it sat empty for almost 3 yrs.

We would not have been able to afford a home, let alone one this size with 9 acres of land with over half of it are woods that we plan to replant portions and keep for the wild life(less attack on the food garden).

The payments are less than half of what our rent in town would be and we could barely make that rent each month since repigism has cut our income by 75% since 98. We have to be able to grow food since we cannot afford food on a regular basis any more..and the pigs wonder why I hate repubs with a passion. The next campaign idiot that comes up here for our puke senator will be warned to go away or i will turn out the dogs (The dogs medium large mushes , but they do have not know that).
Need i say I hate raygun and hope every fucking idiot that voted for him rots in hell with him.

[laughingliberal]

9. "I hate raygun and hope every fucking idiot that voted for him rots in hell with him."

Agree completely and will add any who are still supporting his fucking supply side economic scams to that list.

[pipi_k]

7. And it's not just one's immediate neighbors' homes...

My little rural town has two distinct parts...the town part, and the woods/dirt roads part.

I live in the woods/dirt road part. I'm trying to sell my home, which comes with over 8 acres of land. The homes down in the town part are listed at ridiculously low prices...at least $75,000 less than mine, although they have more square footage and more rooms than mine does. They're also at least 100 years old, have no land, and one of them didn't even have a driveway for parking cars.

So people see these homes and compare them to mine, and think they're being cheated. Especially when they look on Zillow.com and find out that this house sold to us for less than $100,000 in 1996, but that was before we more than doubled the size of it in 1999...plus added two ponds, a garden shed, a three season sun room, and a carport.

What also doesn't help is that, in a town with a population of less than 1400, there are over 40 homes on the market, in one form or another.

We don't have to sell, really. The house is great, the surroundings are great...the only problem is how far we are from the kids and grandkids, and various resources like shopping and medical facilities. We'd like to get back a little bit closer to "civilization", so that's why we're selling.

In the meantime, we look around and see some really nice (and cheap, for now) houses we'd like to move TO, but...we can't do anything until this one sells...which could be never, the way things are going.

It's all interconnected, and it's not good these days...

[tritsofme]

12. A friend's son is about to close on a foreclosure in a nicer Chicago suburb.

The price was amazing, probably nearly a $100k discount over what a similar non-foreclosure would be listed at in the neighborhood.

While it is an absolute horrid market for sellers, buyers could easily find the deal of a lifetime.

[Odin2005]

13. Oh Jesus Christ, I am so sick of people obsessing over proprty values.

A house is a place to live, not a fucking investment to sell later on in a goddamn bubble.

[MineralMan]

17. +1. People have stopped seeing homes as a value in themselves.

I own my house outright. It's worth less than I paid for it today. That's meaningless, since I live in it and plan to die in it. It's not for sale, so its value is in what it is, not what I could sell it for.

For too many people, a house is just another way to borrow money. Down that road is an ugly place indeed for many.

[lynne]

14. Makes no difference. Most don't have the money to buy and the rest can't get a loan -

- no one is going anywhere anytime soon.