Because they are in such demand, at this point, we sell primarily foreclosure properties in our Smoky Mountain real estate market. By the grace of God, I saw this current situation coming early and built relationships with several of the larger institutions that manage foreclosed homes here in the Gatlinburg area. In fact, my first exposure to our local foreclosure home market was in 2005 when I started listing REO properties. Although I only sold a few foreclosures in 2005 it has become a huge part of our business. In fact, the majority of all of my 2009 sales were bank owned properties and that will unfortunately likely be the case in 2010 as well. I say unfortunately because the business is a little hard on the stomach. There is nothing in my work day quite as unpleasant as having to tell someone that the home that they once owned is now owned by the bank and that the bank would like them to leave ASAP. A conversation that begins “Mrs. Smith, you and the kids are going to have to go somewhere else” never loses its pain for me. In fact, I would rather take a beating than have to explain that to someone.
At the same time, it baffles me when someone takes out their frustration on the house. If you wish, blame the lender for making a loan that they knew the borrower would have a difficult time repaying. If you prefer, fault the borrower for taking an adjustable rate mortgage which would adjust to a monthly payment clearly above their ability to make. You might blame the economy and the employer for the lost job that precipitated the foreclosure. Heck, you might even consider an overzealous real estate agent who sold the client a home larger than they could reasonably afford. Whoever you choose to blame, it isn’t the house’s fault!
And yet, apparently the borrowers who have lost the property all too often DO blame the home. The innocent, inanimate, and altogether faultless home is frequently the victim of the borrower’s frustration. We regularly see homes that have been stripped of the furniture that was included in the sale price. To be fair, the furniture is not legally covered by the trust deed which is the legal instrument that borrowers use to pursue the foreclosure. This means that the furniture belongs to the former homeowner even though it WAS included in their purchase price and its value was considered in the pricing of the property. Regardless, the furniture in vacation rental homes that are foreclosed upon is usually removed by the former owner.
I don’t have a problem with that – It is after all their legal right after all to remove all of the non-affixed contents. What does genuinely irritate me is the abuse that some former owners take out on their former home. The property that I saw yesterday is an excellent example. The owners removed every electrical fixture, every bathroom vanity, all of the kitchen cabinets and countertops – Heck, they even ran off with the kitchen sink! I have seen HVAC units removed as well as water heaters, hot tubs, mirrors that were permanently affixed, and just about everything else you can imagine.
It is as if the former owners are “getting even” with the lender, the bank, or maybe the world by stealing these permanently attached fixtures and other items. The no-legal (but apt) explanation of what stayed with a house used to be “screwed or glued it stays, hung or placed it goes” apparently no longer applies for many of these former owners. I do believe that banks are going to start pursuing these vandals (yes, that’s what I feel they are!) and I hope that they are successful in getting some satisfaction.
The costs of repairing these homes is considerable, often adding up to 5 figure amounts. We are tasked with getting multiple quotes on the repairs and then overseeing the work to make sure that it is done properly. The bank may however have the last laugh. Many borrowers don’t realize that after they are foreclosed upon and lose their home the pain may not be over just yet. The bank is in most cases entitled to whatever shortfall the sale of the home produces. As a simple example, let’s suppose that a home sells initially for $125,000 and the buyer borrowed $110,000 for that purchase. If after all expenses are included, the sale of the now foreclosed home creates net proceeds to the bank of only $90,000 the shortfall for the bank below what was owed (including foreclosure costs, interest, and penalties) CAN be the subject of a new filing by the lender. The former owner can in fact be held liable and a deficiency judgment securing restitution are possible remedies for the bank. In short, the former owner(s) are potentially legally liable for the bank’s loss on the foreclosure. This is something that isn’t talked about much but don’t be surprised if it is talked about more in the near future. With banks losing millions of dollars in our current foreclosure real estate fiasco, they will be looking for remedies wherever they can be found…