In my own home market, 1 in every 33 homes is in some stage of the foreclosure process. That means that there is a public record filed in the form of a notice of default (NOD) or a notice of trustee sale (NTS). Even more homeowners have already missed one or more payments to their lender, they’re just not in the public stage of the foreclosure process.
These numbers are truly scary and should be of concern even if you’re having no problems paying your mortgage. I was at a loan signing a week ago where during the signing process the homeowners, real estate investors themselves, mentioned in passing that their neighbor just lost their home to foreclosure. The story isn’t novel. According to the Distressed Property Institute, 70% of properties that go to foreclosure receive no visible intervention.
This makes no sense since foreclosure isn’t just damaging to the homeowner who suffers the foreclosure, but it also hurts the homeowners in the neighborhood who are current with their loan.
Foreclosed Properties Reduce Neighbor’s Equity
A foreclosed home is often sold vacant. A vacant property, according to the National Association of Realtors, ages on average four times faster than a property that is lived in and cared for as a home.
What this means is that deferred maintenance increases rapidly. Landscaping dies and decays. Pools become mosquito habitats and wildlife moves into the area. All of these factors mean that the eventual sales contract is going to represent a much smaller bottom line than if the property was lived in.
Foreclosures Hurt Local Government Services
If your neighbors aren’t paying their mortgage then they aren’t paying their property taxes. In most communities there is a direct correlation between local property tax revenues and the quality of the community itself. When taxes aren’t paid, the prosperity of the community going forward is seriously threatened.
Property taxes make up the bulk of the funding for local schools, libraries and emergency services. Schools that aren’t well funded tend to produce higher drop out rates, have higher crime and require more emergency services, which wont be available.
Foreclosed Property Increases Crime in the Neighborhood
According to the United States Department of Justice increased violent crime rates in neighborhoods ravaged by foreclosure is a serious concern. When a neighborhood has 2.8 foreclosures per 100 homes, that neighborhood sees a jump in violent crime of 6.7%.
Return to that statistic in my own local market of 1 in 33 homes facing foreclosure. Couple that statistic with the fact that decreased tax revenues means that less police, sheriff and fire department resources are available and the foreclosure crisis suddenly means more to the neighborhood left behind than the foreclosed neighbors moving out.
They get to leave, while you’re stuck picking up the pieces with less equity and ability to make a similar egress.
With more and more of our friends and neighbors facing foreclosure in the next several years it behooves all of us to work to remove the stigma surrounding foreclosure. The problem is facing everyone and is cutting across social and economic classes. The foreclosure problem is simply everyone’s problem and should be discussed in that context. As citizens in communities we need to all work to reduce the shocking statistic that says 70% of foreclosures never sought any visible help.
Get out there and talk to your neighbors. Everyone knows someone in their social network that is facing this problem. Be a problem solver and help save your neighborhood.