Clark Howard was talking about this a couple of days ago, and Fox News is talking about it today. And it doesn't involve a pole...
Foreclosure Stripping...
In effect, some folks that are losing their homes are "fighting back" in their own little way. Prior to departure, these folks are looking to get as much cash from the house as they can before they are out. They are removing items from the home and selling them via Craigslist and other means:
- Appliances
- Countertops
- Cabinetry
- Flooring
- Light fixtures
- Wiring
- Plumbing... including copper pipes
- Wood from the deck
Most of us in real estate have been in a house like this. The refrigerator, dishwasher, stove and a bunch of light fixtures are gone. In some cases it might be legal... in other cases, the home owner might be committing a crime.
Items that aren't built in, like clothes washers and dryers, refrigerators and window air conditioning units belong to the home owner as personal property. In effect, they have the right to sell them at any time. They aren't part of the property.
But, items that are built in are part of the property. Things get a little murkier here. Some sources are saying that BEFORE actual foreclosure proceedings, the home owner has the right to sell them. Other sources are saying that they are part of the home, and therefore are part of the security of the mortgage and the homeowner can't remove them unless he is replacing them with similar items.
After the home has been foreclosed, the (now former) home owner definately doesn't have the right to sell attached items.
Obviously, people that come into a foreclosed home and strip the wiring and copper plumbing out of the walls are breaking the law.
Good deals or big trouble?
So, if you are looking for a deal on lightly used appliances or fixtures, you need to be careful. What you don't want to be involved in is buying stolen property. You could lose both the item you bought AND the money you bought it with. It is possible that you could even be charged with possession of stolen property.
Lose-Lose-Lose
This is a losing issue for neighboring home owners. Removing the fixtures from the home lowers the price it will sell for, depressing values in the neighborhood.
Obviously it is a loser for the banks and investors that owned the mortgage. They see a larger loss on the loan than they would see otherwise. It also likely means that the property is on the market longer.
It is a loser for buyers. The reduction in price often doesn't make up for the damage done by the removal of the fixtures. And since the fixtures generally need to be replaced before the home can be occupied, many buyers are locked out of purchasing the home. Often, cash is needed up front to rehab the property and stretched buyers can't afford to come out of pocket even more at purchase.
And actually it is a loser for the home owner. They may take a bad situation and make it worse. Not only are they losing their home, but they might also end up facing criminal charges...
I feel bad for everyone in the situation... except the banks. As a home owner, I have watched prices pushed down in my own neighborhood. As a buyer's agent, I have seen people really want a home, but not be able to buy it because the deal couldn't be structured. In some cases an FHA 203k might be the solution, but not always. And my heart goes out to the home owners facing foreclosure. In addition to the tragedy of losing their home, they are usually facing other things like job loss or health issues that are underlying causes.
But the bank issue is deeper. I have a hard time mustering pity for an industry that has sucked almost a trillion dollars in taxpayer money to fix problems they haven't seemed to address yet. HOWEVER, the final effect of increasing the cost of the bad loans is that they will push rates higher and they will make qualifications tighter for lending. That means that good people with good credit will NOT be able to buy homes. That means that everyone loses even more!
Be careful out there...
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