All posts in the topic Proliferation of vacant properties due to foreclosure
Summary
- There are 11 posts — by 10 authors — in this topic.
- Latest post made by John Harris at 2007 Aug 01 01:57 UTC
I don't think it's necessary for me to provide a source for the fact that number of vacant properties in St. Paul is on the rise due to the growing number of foreclosures. Here's a list anyway: http://www.stpaul.gov/depts/dsi/codeinsp/vblist.html There are a number of worthy measures afoot to stem the growth of foreclosures and curtail the various lending and property scams that are causing the alarming rise in vacancies. I have nothing but praise for them all. I'm having a hard time, however, getting anyone to pay much attention to the blight that occurs to the neighborhood, after the fact, when the vacant properties begin to deteriorate. That's my issue. The bank that ends up in possession of the paper asset after the foreclosure is not typically equipped to maintain the physical property nor keep it occupied. I'm not faulting the bank, they just don't keep a staff of landlords and property managers on the payroll to provide for remediation and tenancy. To the bank, the property is simply one piece of paper in a big stack of mortgage assets and, as long as they continue to pay the property taxes, their asset is protected. They do have to keep the grass cut and shovel the sidewalks, though, don't they? And I confess I don't even know how these services are accomplished or enforced. Anyone? Because I think it would provide a foot-in-the-door. (read on) Councilman Thune's office has said they're placing their faith in movements by bank shareholders to pressure banks into short-selling these properties to avoid taking the hit for depreciation. I just don't see that happening, and I don't think it's necessarily good for the housing market, either. The Community Stabilization Project has had incidental success in pleading with the bank to continue the current tenancy, especially in the case of "straw buyer" scams where the tenant hasn't even received the required notice (not the bank's fault, either, but. . .). Far more often than not, however, the bank doesn't have anyone to send a rent check to, and isn't interested in putting anyone on the payroll to start collecting them. In the meantime, vermin begin to bore their way into the buildings and the property begins the lengthy descent into condemnation, devaluation, and demolition. Drug traffickers have been known to create clandestine entries into these properties to use them for warehousing and sales centers. Nearby residents become disgusted and frustrated and the tax base stagnates. What to do. It seems entirely do-able to form a sort of non-profit, NGO property management service that would provide for remediation and continuing occupancy. Such a service would generate a margin of revenue for the bank after paying its operating expenses. It would also retain the value of the bank's asset. The hard part, of course, is creating some incentive for the bank to pay attention to remediation and occupancy, even if it's made easy. It's a problem that's not going away, and I think it's time to formulate a community response in recognition of the fact that the neighborhood itself is ultimately a victim of these easy-credit and "straw buyer" scams. I don't see the free market correcting itself in this case. Or, perhaps there's simply a regulatory obstacle that needs to be removed to prove the bumper stickers right. Guy Western the West Side
There are several proposals in the works to deal with vacant properties on the local level, that should flush themselves out in the Mayor's Invest Saint Paul program, which we should see with this next budget. One issue that is very problematic on the bank foreclosures is that they are placed on the market "as is." If you were a real estate agent in a tight housing market and you were looking through the MLS for houses to suggest your client might want to look at to buy, what are the chances that you are going to suggest that they look at an "as is" house? A large portion of houses are still sold by some other agent bringing a client to your house and showing it to them. If I am scanning through the MLS looking for houses that I think you might like to buy, the "as is" house does not flow easily on to my list. So, there may or may not be something wrong with an "as is" house but buyers will assume that there is something wrong that the seller will not fix. So, if market forces are going to let these things sit vacant for a long time, we need an intervention strategy. JMONTOMEPPOF Chuck Repke ************************************** Get a sneak peek of the all-new AOL at http://discover.aol.com/memed/aolcom30tour
Guy is right that the marketplace does not function very well with the current upswing in mortgage defaults and foreclosures. The lenders who ultimately hold the paper are not particularly well prepared -- and certainly not sufficiently staffed -- to correctly manage the sales of these properties. There's no way that I see banks or investors managing their maintenance or rental given the marketplace pressures on the banking/investment industry. We should note that the list of homes that Guy provided in the link are those which meet the formal definition of "vacant buildings" under city code. These are buildings that meet one of these criteria appended to the end of this post. The scary thing is that there are a number of homes that haven't descended to the level of meeting one of these criteria but are: • either in default -- or approaching foreclosure -- and • are also unoccupied. It's just a matter of time before many of these properties descend to the "vacant building" category. Unoccupied homes that haven't descended to the "vacant building" criteria are a challenge for the real estate industry. These properties typically don't appeal to the average buyer and the bank often has unrealistic expectations for pricing. The average buyer isn't often equipped to take on the rehabilitation efforts that are needed ... the buyer who can take on those efforts are often stymied by unrealistically high acquisition costs that make a reasonable return on the investment of improvements and sweat equity impossible. I'd argue that homes in this "unoccupied but not yet vacant" category are really the best candidates for the kind of management/intervention that Guy is proposing. Without intervention, these homes will slip into one of these criteria and become even less attractive candidates for purchase. In effect, I'd say that a form of housing triage is needed and many of the properties on the "vacant building list" are too far gone to be sold through the conventional real estate market. The "unoccupied building" category is where the intervention really needs to happen. DEFINITION OF VACANT BUILDING: (7) Vacant building: A building or portion of a building which is: a. Unoccupied and unsecured; b. Unoccupied and secured by other than normal means; c. Unoccupied and a dangerous structure; d. Unoccupied and condemned; e. Unoccupied and has multiple housing or building code violations; f. Condemned and illegally occupied; or g. Unoccupied for a period of time over three hundred sixty-five (365) days and during which time the enforcement officer has issued an order to correct nuisance conditions. (source: http://www.stpaul.gov/code/lc043.html#sec43.02. )
Affidavit of Sharon Anderson and Bill Dahn victims of illegal "takings" of Homestead Propertys _http://sicko-citystpaul.blogspot.com_ (http://sicko-citystpaul.blogspot.com) and _www.billdahn.com_ (http://www.billdahn.com) Currently the 1,124 vacant buildings your mentioning as listed at _Vacant Buildings as of July 1, 2007_ (http://www.ci.stpaul.mn.us/depts/dsi/codeinsp/vblist.html) do you have the Aug.1st update: However the issues of conflicts $430,000.00 forgivable loans apparantly to your nonprofit company?? _http://sharons-foia.blogspot.com_ (http://sharons-foia.blogspot.com) must be clarified as We as Candidates Ward 2 are working on exposing major Realestate Corruption in City Hall. It takes 2 to testify to Treason in Open Court. Peace May God Guide us accordingly Thanks to Gates & Google We remain dedicated servants, strict constitutionalists for the Public Good to make the Citizenery WHOLE. ************************************** Get a sneak peek of the all-new AOL at http://discover.aol.com/memed/aolcom30tour
Chuck makes some very good and interesting points about the
many foreclosed properties sitting vacant in parts of Saint Paul. One
thing that he brought up was the condition of foreclosed properties. Although
it is possible to find some foreclosed properties in move-in condition, it is,
in fact, quite rare. Homeowners forced by a lender to vacate a property
almost always do, or have already done, significant damage to a
property. They're mad at their current misfortunes, and they often
wreck the places before they leave. Or their financial problems kept them
from maintaining a property for a year or more before they finally lost the
home.
There just aren't very many "good" foreclosed properties, and those
that are in move-in condition tend to sell pretty quickly, even today.
One little known fact on bank foreclosures is that lenders lose, on average,
close
to half of the outstanding principal balance on foreclosed homes, and that's in
a good real estate market among prime borrowers. Conditions today are
forcing lenders to take even higher losses, so banks aren't making or keeping
money
on foreclosures -- instead they're losing a lot in every foreclosed home.
There are also substantial risks with a neighborhood development strategy
predicated upon coercing banks to sell faster at even lower prices and higher
losses. The first is that banks must respond with higher lending terms in
the form of higher rates, down payments, or other fees in order to continue to
do business in a city that imposes such a policy. No lender has to do
business in Saint Paul, so it can result in lower property values and
lower demand for high quality homes in the city as fewer lending options are
available to buyers. The addition of
non-standard policies like forcing quick sales of repossessed homes makes it
difficult for banks to sell securities of those loans to investors, so they
usually just avoid the problem altogether by ceasing to do further business
there.
The other risk is that it could further encourage the shift in a community
toward more lower-income members. Despite the challenges and needs in
providing high-quality housing for lower-income people, too much of a
concentration of poverty results in a community that simply can't prosper
because it
drives too many prosperous members out the community. It just ain't home
to them anymore. Community development organizations such as district
councils and CDC's exist primarily to keep a community called home for the
residents who are there and have been there a little while, so this can be a
really big deal.
Of course, leaving too many dilapidated, vacant properties around can have the
same effect on community makeup, so it's true that some form of intervention
may
need to happen. So I'm going to go out on a limb and bring up a nasty
word among progressive-minded community activists -- "gentrification."
It's important to remember that
gentrification usually means making a traditionally middle-income community
into an upper-income one. Much of St. Paul's Merriam Park is a good
recent example of this. But gentrification does NOT apply to
traditionally middle-income communities that have recently become lower-income
because of a recent concentration of poverty there, like large parts of St.
Paul's East Side. Rather, there are instead both moral and economic
imperatives to return traditionally middle income neighborhoods to more
prosperity by both preventing and reversing further concentration of poverty
there.
The glut of foreclosed properties on the market provides an important window of
opportunity that the city, real estate developers, and community organizations
should take advantage of by working together comprehensively. Rather than
forcing banks to sell at the lowest prices to move their homes, investors and
the city should instead find ways to maintain those properties in vacant states
until the real estate market improves to the point where investors can rehab
those properties and sell them at acceptably high prices and thereby increase
and maintain income levels in a neighborhood. Such a strategy has, in my
opinion, a much better chance of increasing needed city revenues without
raising taxes,
as well as keeping St. Paul a desirable and livable city for middle-income
working people.
On 7/25/07, Jim Kielkopf <email obscured>> wrote:
> One little known fact on bank foreclosures is that lenders lose, on average,
close
> to half of the outstanding principal balance on foreclosed homes, and that's
in
> a good real estate market among prime borrowers. Conditions today are
> forcing lenders to take even higher losses, so banks aren't making or keeping
money
> on foreclosures -- instead they're losing a lot in every foreclosed home.
/snip/
> The glut of foreclosed properties on the market provides an important window
of
> opportunity that the city, real estate developers, and community
organizations
> should take advantage of by working together comprehensively. Rather than
> forcing banks to sell at the lowest prices to move their homes, investors and
> the city should instead find ways to maintain those properties in vacant
states
> until the real estate market improves to the point where investors can rehab
> those properties and sell them at acceptably high prices and thereby increase
> and maintain income levels in a neighborhood.
To a certain extent, the bank/lender needs to resolve whether to sell
now at a "below-book" price or sell later at a still lower "below
book" price. (Plus, the bank usually ends up even worse later on when
one calculates the carrying costs such as property taxes, utility
costs, etc)
I think it's an illusory strategy to hold on to the property "until
the market improves." First, demand will likely remain relatively
stable unless there's a huge influx of buyers -- which I don't think
is going to happen. Second, supply will also remain relatively stable
With the genetic make-up of a North Atlantican, I was suffering in St. Paul's
sweltering heat yesterday so retired to the sole air-conditioned room in our
house. I turned on the telly to watch the bad news, and then Sienfeld came on.
It was the one about the Evil Odor In The Car. So today when I went inside the
historic Jurka House (16 Douglas Street), I thought I was going to have to take
a bath in tomato juice and call a priest. YUCKa House is more like it - ew!
The DeGidio's waitress was not attracted to me at all.
As an amateur historic preservationist, I am interested in saving that house.
Well, not nearly as interested as I was yesterday...
I went in there with a fellow who knows a thing or two about these things -
financing, sources of money, costs of rehab, etc. He knows of my dreamy
tendencies and was quite kind as he laid out some rough numbers for me:
Value of 25' x 173' lot: $40,000
Cost of house, as is: $68,000
Cost to renovate it: way more than the $40,000 I was hoping
Cost to demolish it: $10,000
et cetera
Apart from one piece of nice door hardware and about 6 pieces of trim, there
were no redeeming qualities save the stories of Blanche and family. It was
very demoralizing, not to mention vomit-inducing. I wouldn't let a crack
dealer live in there. This is no Dahl House, I'm afraid.
I don't really have a point, except to say that I have a new appreciation for
the economics of this issue. Not many free market capitalists are going to
come in and beautify the home unless it's part of a larger scope. We've got to
do something collectively and not wait for the next scumlord to perpetuate this
type of sub-human condition.
Unless some rich person wants to spend enough money to fix up all the houses on
that block, I'm going to have to give up on my Jurka dreams.
Oh, I do have a point after all, one that my friend made (who has been to
plenty of auctions and such): the realtor who met us gave us not only the MLS
data on the house but also a letter from the City that listed everything that
would need to be done to the house to make it habitable (what optimism!). This
type of list is not always presented to auction attendees who seem to come from
hundred of miles away, so they buy a house for $30,000 and then are surprised
when they find out how much work they are expected to put into it.
AMH
West End
Rather than discuss how we could force banks to sell for less, maybe we
could ponder ways to make acquisition and rehabilitation easier?
The biggest problem with acquisition is that most of these homes are not
habitable. Banks get the heebie jeebies when considering lending on
uninhabitable homes. Only buyers with outstanding credit-worthiness can
obtain the loans necessary. If you want to attract home owners, our city
should approach LOCAL banks (or banks holding the foreclosures) and see if
there is a way they might loosen the standards. Maybe the city could create
a subsidized Mortgage Insurance? Just one possible idea.
St. Paul is one of the hardest places in the metro to rehabilitate a home.
Why? St. Paul is quick to condemn or require a "code compliance." It seems
to me that the threshold to issue such requirements has DRAMATICALLY lowered
in the past few years. Push them back up. These heavy hammers should be
used seldom, not frequently. They create volumes of work-orders on every
vacant home.
St. Paul has created their own licensing system for mechanical workers
(heating, plumbing, electrical). This means many contractors licensed by
the state and currently working across Minnesota cannot work in St. Paul.
This creates an oligopoly and the prices they charge reflect that lack of
competition. I am not proposing we lower the standards, but do we really
think the houses in the rest of the state are unsafe? Eliminate this city
created oligopoly for good.
Do you see the burden? First, be quick to issue a book of work-orders, then
unnecessarily restrict who can do the work. Ouch!
Finally, consider a plan that lets homeowners and investors do more of their
own work. This may necessitate a more thorough inspection for some parts of
the work, but it would make the rehabilitation more affordable.
Of course all of this requires some faith in the private market. I won't
hold my breath that such a proposal will be appreciated in this forum. I
suspect the proposals you would appreciate will sound like "tax the small
business; fund my non-profit friends."
Regards, Bill Cullen.
Former St. Paul property owner.
it seems to me that this is a good opportunity to get rid of the
crummy houses. i see quite a few regularly that would probably be
better off as a re-do. so much work is needed to make them better,
and it seems like they will just continue to decline over time until
they are gone anyway.
i think in a majority of cases, it is the "least desirable" houses
that will be condemned, and the ones with the best potential will
find buyers.
m pahs
west side
When I moved into my property in Merriam Park, Merriam Park was on the border
of going up or down. Here is what I think I made the difference:
1) Many people like myself decided an old house was better than a suburban
house and put in both money and work into old houses.
2) In Merriam Park there was an active talk between neighbors including a block
parties movement. There are many stories of thieves being chased by local
people. The greeting of "Hi, how are you? Tell me who lives here or I'm calling
the police?" caused a few flights and some interesting ways to meet relatives
of neighbors and new boyfriends.
3) We don't have allies in our streets. A few strategic fences stopped back
door access. Old people sitting on front porches and even people who have made
mini parks on boulevards, now made the difference, by always watching the
street. Above all, people use front yards, walk and bicycle! Have parties in
the front yard too! We have a neighbors group that sits around a portable fire,
talking late at night. Neighbors own the street.
So I have been walking my precinct, delivering notes and political mail, so I
have had a chance to survey my area by looking. The people I most met on the
streets were contractors. Many contractors are fixing vacant buildings, which
bodes well for the future. Homes on the two streets near Summit are being
upgraded by homeowners. The number of incredibly beautiful gardens is
overwhelming - on all of the streets. There is a curious trend of tomato
gardens on boulevard.
Here is what I would do:
1) I agree a nonprofit to rent/manage vacancies would be good. If the city put
some more financial teeth, then that would help. Properties that are being
improved each month and watched, even if vacant, should have a special
categories. There is a old house near me that is essentially being gutted and
rebuilt.
2) There should be some deal where banks have to pay a neighbor/non profit to
walk through and watch over the house. Banks suck as good neighbors and smart
owners. All of us who actually own and live in our houses, have a neighbor
watch when we are out. Also the walk through person could pick up dropped off
lit and mail and make the house look more lived in.
3) I wish there was more incentives for banks to sell instead of hold. Then the
market would act like a market and the prices would come down to where they
should be and our property taxes would go down too (yeah!).
So what can the city council actually pass? Would the landlords support this as
well? Could the landlords figure out that a mandatory rule would give the same
burden to every landlord, so there would be no financial advantage in
neglecting property (neglect = fine). Then banks would have to comply. Then
every community would look better and therefore be easier for landlords to
rent.
If we are work harder on St Paul, we can make St Paul a better community to
live in. That is what happened in Merriam Park. Merriam Park can be a model for
all of St Paul.
Grace Kelly nicknamed Kelly
Still-believing-in-community curmudgeon in Merriam Park
> 3) I wish there was more incentives for banks to sell instead of hold. Then
the market would act like a market and the prices would come down to where they
should be and our property taxes would go down too (yeah!).
Need to be careful here because if you force banks to sell for less
than owed, then it will be much, much harder for people to get
mortgages as banks will be unwilling to take any risk.
It isn't a bad idea but we must be aware of all the consequences.
John Harris
webber-camden, mpls
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