Foreclosures Trashed - What’s it worth to prevent this?
The Wall Street Journal recently posted an article discussing the practice of “Cash for Keys”, which quite simply, is paying off those living in foreclosed properties to leave, without incident or destruction. Apparently “Foreclosure Rage” is a frequent enough occurrence to cause banks and lenders to send out their associates to foreclosed properties they suspect the residents are still inhabiting and leave a offer of cash to vacate or to call and negotiate a better offer to leave.
How much better?
The owner, a 43-year-old man with two children who spoke on the condition that his name not be used, says he bought the property in 1993 for $140,000. Three years ago, he says he had the house appraised for $440,000 and took out a $207,000 home-equity loan to pay off credit-card bills and buy his wife a new van. His initial payments were an affordable $1,800 a month.
He fell behind, however, after he went through a divorce and his landscaping business faltered, just as his interest rate was rising. The man worked out a payment plan with the bank and borrowed heavily from his father, but, including penalties, his monthly payments rose to $4,000, he says. After two months, he says, he ran out of money, and the bank foreclosed.
He called Mr. Carver after receiving the cash-for-keys note, but was left cold by the bank’s initial $500 offer to leave the house soon, intact and broom-swept. “If I stay here it will cost them a lot more money,” both men remember the former owner saying.
The man says he was just pointing out that eviction is expensive for the bank and says he had no intention of damaging the house. But he had “pushed the right buttons” for Mr. Carver. “He didn’t actually come out and threaten the property in any way,” Mr. Carver says. “But I assumed that he probably wouldn’t be too happy if he got evicted and locked out.”
Mr. Carver consulted with the bank and upped the offer to $2,800.
So not only are those in foreclosed properties not forced out, but they get a cash bonus to possibly help get a jump start at finding an apartment and get their financial life back on track. The banks however, consider the ‘cash for keys’ practice commonplace and find it beneficial to pay out a small sum rather than to try to market a foreclosed property which has been trashed. Some angry foreclosure owners, it seems, have gotten back at the banks by trashing their homes. Pouring paint on the carpet, having their pets use the home as a giant litterbox, and holes in the walls are commonplace reports. And the banks just find it easier and definitely more profitable to sell a foreclosed home which is in good shape. They’re not even rehabbing/remodeling the trashed ones, they’re taking less to move a trashed foreclosed property rather than put out the time, effort and money which as we’ve learned, only returns 80% at best, usually, of the remodel cost.
Lesson: Take the money and run; Don’t pack up the appliances, smear goat’s blood on the walls and leave the middle of the night.
Buyer’s Revenge: Trash the House after the foreclosure (Wall Street Journal)

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