It’s become fairly common with the dips in housing prices for those who are underwater to walk away from their mortgage, but I just learned that in Chicago, practically in my backyard, banks are beginning to follow suit.
Perhaps this isn’t news to you, but for me, it’s interesting to learn about banks literally abandoning properties. I just read an article from the Chicago Tribune that discusses the issue of banks walking away from the foreclosure process on several hundred homes in some Chicago neighborhoods leaving those neighborhoods and vacant homes in a sense of limbo.
Why Would a Bank Walk Away From a Home?
When the properties become worth less than the costs associated with going through the foreclosure process including marketing and fees associated with getting rid of the properties the bank have an interest in simply walking away. Makes sense, and in some of the most blighted neighborhoods where houses are selling for only a few grand it’s simply not worth the bank’s time to try to liquidate the property.
For example, do a quick search on realtor.com for homes in Chicago and search price low to high and you’ll see some pretty dinged up properties and blighted neighborhoods. If you were a bank, would you want to handle it?
According to the article:
“Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can’t recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren’t completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.”
What Happens to These Homes?
As a result of these banks walking away from the homes the burden can be shouldered by the taxpayer, which means that there’s yet another strain on the budget during these difficult times. Many of the homes are demolished or eventually auctioned off when the issue of title is finally taken care of. However, in the mean time they’re often vandalized and further degraded.
The idea of both home owners and banks walking away from homes reminds me of a romantic comedy when both characters are walking away at the airport and the end of the movie… perhaps they’ll eventually turn around and come running back towards each other when they realize they can’t live without one another? Or perhaps these homes won’t have a happy ending (more likely the real world ending).
Have you heard of banks walking away from properties in your market?
Image from juggernautco