Why does it take so long for bank owned foreclosures to go up for sale?

Factual Questions
1

Background:
The guy next door to us died a year ago. His wife and children never returned to the home and I believe moved in with the grandparents. There was a BIL living there until Aug or so. But even while he was in the house he wasn’t maintaining the exterior. Who knows what the inside looks like! There was no gore to clean up or anything, it was a cocaine induced heart attack (we had no clue he was into drugs!), but they had 4 kids under 7 so I’m sure it’s in need of some rehab. We didn’t complain about the yard out of respect for the family’s situation until the BIL left it with a summer’s worth of weeds. Now it looks like a jungle. There’s also a car in the driveway with the windows rolled down about 2 inches (even in the pouring rain) that’s not moved in a couple years. I sure hope nothings living in there! It just needs to be junked I’m sure. So now we have weeds coming into our yard so I called the HOA. He found it to be bank owned now which means they just let it go into foreclosure. No shocker. Unfortunately that means we have to wait for it to go up for sale before it will be groomed again.

Question:
So what’s the hold up? It seems like a bank would want to turn those over quickly to avoid property taxes, insurance, and rapid depreciation. What is happening that takes so long?

Also:
Any suggestions on what to do about the abandoned car? (Harris County, TX). Is that something the county can haul off or does the bank have to do it? The bank may not even know it’s there.

2

It’s not unknown for concerned neighbors to mow the lawn of an abandoned/foreclosed home if the bank can’t be bothered. It’s amazing what a difference just that makes.

Right now, a lot of banks have more homes than they know what to do with, and no experience/expertise in managing properties, nor desire to hire someone to take care of it. It’s a problem.

3

if you don’t have title to the car, you shouldn’t be able to have it towed. In Texas, all values of “should” re law are subject to re-definition.

Mowing a lawn, however should not be a problem - unless somebody shoots you under the “protecting my neighbor’s place” doctrine.

4

Find out what bank and call 'em up. Make sure they know about the condition of the premises and the car. Use words like “health and safety issue” and “may harbor vermin.” Be persistent. The squeaky wheel gets the grease.

5

News item from a couple of years ago: Banks have so many foreclosed houses, they have given up even trying to sell a lot of them. Just as the resident owners have abandoned them, likewise the banks in turn abandon a lot of them. (Think: Detroit.)

When this happens, apparently according to the law in at least some areas, the original owners are then, once again, liable for the upkeep. If the city has to come in and do it, they will send the bill to the original owners (if they can be found). In fact, as I thought I understood it, when a bank abandons a foreclosure, the former residents actually regain legal possession of the property. However, they typically just abandon it because it’s usually too far gone to be worth the expense to repair.

Now for the fun part: Where banks own lots of foreclosures, they have been known to send in crews to spray-paint the lawns green!

(ETA: Just googled about spray-painted lawns. Found some superficial cites and one possibly-good cite (being an article in New York TImes) but that one seems to be paywalled.)

6

Okay, a good cite for the main topic of my post above:

Banks Halting Foreclosures to Avoid Upkeep, Kate Berry, American Banker April 23, 2013. Lede (with bold added by me):

7

Our landscapers would charge us a couple hundred to clean up that mess, at least. A mower would just fold the weeds over. Some are waist high. And, it’s a fenced yard so we’d have to trespass.

I’ve thought about pouring some liquid edger over their side of the fence, but my luck our grass is connected and it will kill our stuff as well. Plus I doubt it’s legal.

I think I will try to contact the bank.

Does the bank own the car too, or is it considered an abandoned vehicle?

8

Yes, it does help if the mowing operations begin before the lawn turns into prairie.

Look, I’m sorry you’re next to an eyesore and it’s not fair for the locals to wind up paying for barbering the lawn, but if the bank won’t do it then your choices are either living with the weeds, doing it yourself, or pooling resources with the neighbors (perhaps through the mechanism of the HOA).

9

You need to mow with a rural brush hog, not a suburban mower.

As to banks, there’s another huge factor: Profitablility.

Banks can carry the loan on their books as if it was being paid. And the house as if it was worth the pre-crash price. Once they sell it, they have to admit they took a $100K to $200K hit on the thing. Which harms profitability.

And there’s a multiplier effect. Once they sell one in an area, it becomes necessary to re-price all the others they’re holding downwards to match.

So everybody can pretend everything is fine until they get some concrete evidence to the contrary, then the fiction falls apart. This represents billions in hits to the on-the-books profitability of the banks. CEOs hate what that does to bonuses.

It’s near-term cheaper to look the other way, even though the far term is turning vast swaths of salvageable suburbia into wastelands riddled with derelict destroyed houses.

10

And another strange thing about how banks administer their foreclosed properties. . .

Even if a buyer offers exactly the list price on a bank-owned or foreclosed house. . they have to take a month or two to pray about it, or something before they accept the offer ! It’s infuriating and foolish bureaucratic foot dragging that impedes their ability to off-load these toxic assets !

11

This is the part I’m wondering about.
The house is worth just over $100k. If they market it now, as is, let’s say $80k. The neighborhood sells lots of starter homes. And a sprinkling of rentals. A house takes roughly 2-3 months to sell, often less, rarely more. Flippers love them. So to me, there’s just no reason to hang on to it. Property values are extremely stable here. But deterioration and or vandalism, plus carrying costs, mean that time directly costs them money. It makes no sense not to offload it immediately.

12

It’s not that the property reverts back to the original owners; it’s that they’ve never stopped being the owners.

If a bank starts the foreclosure process by filing the papers, but then doesn’t proceed to get a judgment, the ownership of the house has never changed. The owners are the owners until a court issues the foreclosure order.

13

Laws vary by jurisdiction, but even after the foreclosure order title remains in the borrower until the property is sold to a bona fide purchaser and a deed issued. The bank files a suit to foreclose the lien which it holds on the property. The decree will order the property sold at a public sale (auction). All necessary parties must be included in the suit. At the auction the successful bidder (usually the bank but another lien holder may be the successful bidder) gets a certificate of title, and the lender has a certain period of time to redeem, by paying the purchase price plus interest. After the redemption period expires, a deed will finally issue. Until that time the lender retains title.

14

Substitute “borrower” for “lender” who has a certain period of time to redeem…

15

If all that is true, are you or anyone you know interested in buying it yourselves at a steep discount to either sell, occupy or rent? One person’s problem is another person’s opportunity. You or someone you know could call the bank, explain the situation and offer them say 60K for it. They just might take it to get rid of it in a quiet way. It doesn’t sound like the house is completely trashed. Towing, mowing, painting and basic trash cleanup are cheap and someone could make a good profit from it if they put in a few weekends worth of work.

Buying a foreclosed home can have some additional complications especially if it is a “short sale” (the offer amount is less than the outstanding mortgage) but it may not be a short sale in this case and the bank may be happy to take whatever they can get just to unload it.

16

There are state laws that govern how foreclosures must be done. They specify ample time periods between mandatory steps and allow many chances for a delinquent borrower to redeem. Most of these steps are for months and some are for at least a year. Some can even roll back court actions. Banks must wait for the time periods to pass, or they might (theoretically) be sued. So they are very careful to follow the letter of the law. Or else.

If the borrower cannot be served, often the time periods are increased. The laws, at least in my state, are outstandlingly liberal and were made, I think, so the banks and governments could not easily be accused of trampling on the little guy.

17

My former husband and I surrendered our house in a bankruptcy that was finalized in October of 2011. Until a couple months ago, I was getting calls from the mortgage company that took over the loan post-bankruptcy from our original bank, asking me what my plans were for the property and did I know that there were many options to avoid foreclosure. The only reason I stopped getting calls is because I continued to escalate to supervisor after supervisor explaining about the bankruptcy and the ultimate passing of my former husband, and how terribly traumatic it was to have the exact. Same. Conversation. Every month about losing the house that I built with my own hands. Meantime the house has been unlived in, and god knows what kind of condition it’s in. The folks that were calling were unable to converse with the mortgage people, so they couldn’t tell anyone that the bank in fact owned the house and could nuke it from orbit if they wanted.

So I’d say that it’s also the general stupidity of banks and inability for the left hand to know what the right is doing.

18

Wouldn’t a simple quit-claim absolve the (tried-to-own-it) party of any/all responsibilities?

The place I’m in now was a foreclosure - and a mess. Luckily, I’m a slob, so messes don’t bother me.

In 2009, when I bought it from Downey Savings, it had been vacant for 2 1/2 years.

They were delighted to see my (FICO 530) offer.

This was built in 1979 (big CA rush as properties went from average of US to the insanity of CA prices). It had pressboard kitchen cabinets, factory-second plumbing fixtures, incredibly cheap carpet and shake roof.
Somebody put in:

Double-paned windows and sliding doors
Bars on all doors and windows except the 30"x20" bath window (even it had holes drilled for bars)
Burgler alarm with motion sensors
Real oak cabinets
Wiring for not only TV cable in almost every room, but LAN as well
Swimming pool and spa with both gas and solar heat.

I do wish they had done the carpet.

It went downhill

There was a dog pen in the front yard with the grass worn down from dogs running along the front fence.
Water damage from leaking roof. A very cheap asphalt shingle roof was on it.
Home Depot-grade “floor” tile over the incredibly cheap vinyl in entryway and kitchen/dining.
It was chipped, cracked, and shattered.
The 16x7 garage door was the cheapest Al retract I had seen (the original was single-piece of plywood over a 2x frame)
There was a chunk of house wiring holding up the float in the Mba toilet (I think that was what convinced everyone to pass).
Someone had started to take the A/C compressor with them but gave up after damaging the copper tubing (called ‘line set’)

TL DR:
They owed $279K in 2006 (top of bubble). They could have easily gotten $320K in 2007. They held out for $369K until the market fell apart and they couldn’t even get the $279K.

It sold in 2009 for 120K, and that included a new A/C compressor.

I don’t know the OP’s neighborhood or how many are REO’s (Real Estate Owned - the lender has taken title), but it is not absolutely certain that the lender doesn’t want it.

There could be massive problems with the title - second and third mortgages are common as people try desperately to hold on. It may be tied up in probate or divorce.

If you know a RE agent, you can ask them to pull the deed (or go down to the Courthouse/Recorder and/or Assessor’s office) and look it up yourself. There may be an abstract online.
This will tell you how many liens are on it and the dates they were recorded, and how much.

Again - you may have just had a gift dropped in your lap - if it does turn out to be for sale, it might be worth the cost of a professional inspector. Paint is cheap, and housecleaning is not a rare skill set.
Drop in a new range, fridge, and microwave/vent and the kitchen will go a long way toward selling the place.

The bank doesn’t want to mess with it - what’s your time looking like?

19

Probably not; it likely belongs to whoever issued the cqr loan (which might be that same bank).

In most cities, there are laws about how long a car can sit in a parking space without moving. Often short periods, for street parking. Longer periods for on the property (like in a driveway). But often shorter times for ‘non-working’ vehicles.

So call the city about it. Yhey will have it towed to the impound lot, send a letter to the registered owner, and after a month of so, auction it off. But it will be gone from your neighborhood.

20

This used to be true, but no longer. Here is an example from the OCC, copied from the Kansas City Federal Reserve Bank site:

Also, the Fed and OCC have gotten MUCH stricter about accounting for nonperforming loans as well. I can’t find an agency cite right now, but banks face large fines for not reclassifying loans correctly and timely.