How many of you have seen foreclosed homes damaged or stripped of wall lighting, appliances, even kitchen cabinets, countertops, and toilets? I’ve even seen homes stripped of their copper wiring (I mean, really?!) Indeed, we’ve probably all at least heard stories of homes being damaged as the occupants depart after default. With the ongoing recession, I think this will continue to be a problem – especially in the most depressed markets like Las Vegas and Phoenix.
Seems like the powers that be in my state (Nevada, one of the nation’s foreclosure meccas) agree, and they’ve decided they’re not going to take it. Under AB373, which takes effect October 1, homeowners who purposefully remove or destroy real property while the home is in default may be charged with a misdemeanor crime and subject to arrest and prosecution.
To be clear: If a defaulting Nevada homeowner wants to remove the bathroom medicine cabinet or dismount the marble mantel and take them, the homeowner may be arrested. In property law, the cabinets, countertops, mantles, fixed appliances, etc. are “affixed” to the real property because they are installed – they are either screwed, nailed, cemented or bolted to the real property and thus are a part of that property. Whoever owns the property, owns the fixtures. When a home is foreclosed, that home – and all of its fixtures – become property of the bank.
For whatever reasons defaulting homeowners feel “entitled” to damage their homes, they do more than just bring bad karma. Neighbors are negatively affected by that kind of bad behavior too. Homes that are damaged make neighborhoods look bad. Property values already decline because of the foreclosure, and a damaged home just adds insult to injury for the neighbors.
Plus, banks are not typically inclined to repair REOs, and a badly damaged foreclosed home is often much more difficult to sell than an intact one, which even further stretches out the time it will take for surplus inventory to clear and the real estate markets to find their legs again. What’s more, fair or not, homeowners insurance premiums often increase as criminal activity in the neighborhood increases – which can further dissuade new buyers.
So trashing the home after foreclosure does more than just “stick it” to the bank. Homeowners who do it are hurting their neighbors too. As of October in Nevada, at least, they won’t be doing it without possible consequence. What do you think? What have been your experiences with homeowners damaging the home after foreclosure? What are the related laws in your state?4 comments
I have been talking for years with Mark Madsen about opening my own real estate brokerage here in the Las Vegas Valley. I finally stopped talking and took action! On January 1st, 2011 I officially opened my own Las Vegas Real Estate Brokerage, Shelter Realty Inc.
Prior to making the decision to start my own real estate brokerage, I weighed the pros and cons and spoke with several broker/owners to hear firsthand of their experiences. I also calculated what I paid my broker for the last two years and what I expected to spend this year if business continued to grow and it was eye opening! It became evident that the only decision I had was to open my own real estate and property management brokerage.
After making the decision to move forward, I wrote out a business plan and tried to account for everything that needed to be done prior to opening. Little did I know that it is almost impossible to account for everything!
So, if you’re thinking about taking the plunge like I did, here are top 5 issues that I didn’t account for when I opened my own real estate brokerage.
- General Liability and E/O Insurance (More expensive than I estimated)
- Business license requirements (As a property manager, you are required to be licensed in all cities in which you manage a property, not just the city in which your office is located, like I had thought)
- Client/Landlord Response (It took much longer than anticipated to get back signed addendums from landlords authorizing the transfer to the new company)
- NAID Number (I forgot to apply for an NAID Number. Can’t sell a HUD home without one!)
- Peer Support (Others around you aren’t always excited to see you succeed)
Even though it’s only been a few weeks, I feel re-energized about real estate as if I was a newly licensed agent again and I am looking forward to sharing my experiences as a new broker/owner with others.11 comments
Finding a “bargain” property to purchase for rental purposes takes some analytical skills, market knowledge, and a real estate agent who is in sync with your investment goals.
Some investors would consider the ideal rental property to be a three- bedroom, two-bath house in good repair, or needing minor touch-ups at most, and would be willing to pay at or near market value price if neighborhood rental values would justify the investment.
This investor would be holding the property long-term, and would have a desirable property, available for immediate occupancy, and would attract renters willing to pay top dollar to live there.
Other investors would prefer to find a property that is structurally sound, but in need of extensive cosmetic rehabilitation. If this property could be purchased at a considerably below market value price, and if the cost of repair and possible rental income would justify the purchase price, then that would be this investor’s idea of a “bargain.”
A knowledgeable real estate agent should point out to the new investor that disassociating ones self from a prospective property to rent is vitally important, meaning that the investor should not evaluate an investment property as a property he or she might want or not want to live in. Investment properties should be looked at with profit potential in mind.
Holding a rental property long-term, enables the investor to ride out market swings and generate continued cash-flow. However, consideration must also be given to the fact that the longer a property is held the more extensive the costs of future repairs are going to be, such as roof replacement, appliance replacements, etc.
Furthermore, if the investor is planning to purchase multiple rental properties over time, consideration should be given to hiring a property manager to oversee rent collections, maintenance, emergencies, etc.
Hiring a property manager is often more cost-effective than handling everything one’s self. Additionally, the property manager can be the investor’s knowledgeable guide in calculating the rent levels that would simultaneously attract renters and optimize revenues.
The new investor will have many important decisions to make before committing to a particular property:
- Is this property suitable for my purposes?
- How much should I pay for this property?
- How much of an investment in repairs and replacements would be necessary?
- Would repair and/or replacement costs override any equity gained at purchase?
- Is the neighborhood stable, on the upswing, or deteriorating?
- Would the property location be attractive to a wide range of renters?
Of course, we’re just scratching the surface here, within the limited scope of this article but the bottom line is that the key to real estate investing success is to understand the real estate market and which way it is headed. No easy task, unless you have the experience and the back up of a knowledgeable investment team to guide you.4 comments