What does a foreclosing lender prefer - pay a utility bill or lose an additional $50,000?

Real Estate Agent with Keller Williams Realty Louisville East (502) 664-7827

Usually the lender prefers to lose $50,000 rather than pay an electric bill.

Foreclosing lenders turn down short sale offers after stringing everyone along for months or years. They scare owners off and scare tenants away if it's rented. Owners don't have money to keep utilities on in a vacant house for a year, especially while the bank toys with the seller's finances and emotions.

Banks ignore warnings

If our short sale clients move out and turn the utilities off, we notify the lender and plead with them to pay for utilities if there is a basement and a sump pump that needs to stay operational. The banks ignore our verbal and written pleas. Invariably the basement fills with water and mold contaminates the house.

Physical damage

Mold and three feet of water in the basement can easily cause $20,000 to $40,000+ of physical damage. Water heaters and furnaces get destroyed. Mold infests walls, joists and duct work. It works its way upward to infest upper floors; infesting carpets, walls, baseboards, closets and cabinets.

Vast areas of the house then needs gutting and reconstruction. It needs expensive professional mold remediation. Mold remediation doesn't always work. Missed spots can regenerate. Can you really be sure that the mold didn't infiltrate behind walls that weren't gutted and treated?

Diminished Resale Value - How Do You Even Measure That?

The house is tainted forever as the seller and all subsequent sellers must disclose on the Seller's Disclosure that the house has or had mold infestation. In addition to the dollar cost of remediation and renovation, the lender has to reduce the resale price of the REO to reflect the lower marketability and lower resale value of a forever stigmatized house.

Would You Move Your Family Into A Mold Infested House?

Would you buy a house and move your family into a house with such a history? I wouldn't. Why would I? There are hundreds of other houses on the market without such a problem. How much additional discount would you want to take the risk? $10,000? $20,000? Not enough money in the world?

All this because the foreclosing lender refused to pay the minimal electrical bill to keep the sump pump working while they drag their feet on failed short sales and failed loan modifications.

Posted by



Dave Halpern, Realtor

The Dave Halpern Real Estate Group

Keller Williams Realty Louisville East

Website David.DavidHalpernRealtor.com

(502) 664-7827



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Comments (4)

Sandi Davidson
Florida's Realty LLC - Lehigh Acres, FL

It is truly a shame that banks are not staffed to handle property maintenance.  What you are saying is true, but it's out of primary skill-set unfortunately.  Banks are in the money loaning business, not the property maintenance business. 

May 28, 2011 06:36 AM
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

It's amazing. The problem is the disconnect between the guy with the file - sitting in an office somewhere far away, who will probably be promoted and gone by the time the problem arises - and the people who actually care about the bottom line of the lender. It's just easier for the portfolio manager to ignore it than walk down the hall and ask a boss to waive a policy.

The bottom line (eventually turning very red, and probably something taxpayers will have to make right) - where it could matter, nobody is accepting any responsibility, and nobody really cares.

May 28, 2011 06:38 AM
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Another tale of of the total inhumaneness and lack of sense of the banks.....

May 28, 2011 03:50 PM
Dan Edward Phillips
Dan Edward Phillips - Eureka, CA
Realtor and Broker/Owner

Good Morning Dave, excellent input on the problems of forclosured properties!

May 30, 2011 11:59 PM