We are not seeing a discussion on the "house flippers" and "we buy houses" effects on artificially driving up the cost of homes in this country. Another item that needs to be discussed is the way the "we buy houses" folks are depressing the value of neighborhoods by placing undesirables (sexual predators, drug dealers, etc.) in these homes in order to get some kind of return on their investment. Go into any neighborhood and I'll wager that you will be able to identify the "WBH" rental vs. the owner occupied properties 98% of the time. The "WBH" folks are also displaying tendencies to rape the properties by lack of maintenance and artificially selling these houses back and forth to family members and dummy LLCs that have been set up to allow the investors to show "financial worth" that does not exist in reality, enabling people to over-extend themselves. These purposely inflated properties are artificially bringing up the value of the surrounding properties, sub-prime loans are being made on these inflated amounts, then are being foreclosed. During the foreclosure process it is coming to light that there is a $240,000 loan on a property that is only worth $52,000 (max). Go to your county real estate sales and tax records and look around, pick a few "oddities" then do some "drive-byes," You might be surprised at the number of derelict, boarded-up slum properties you will find that are surrounded by places with an average value of $20,000 to $40,000 and have recently been sold for $250,000+. If you go back and follow the owner's name (paper trail), chances are pretty good that you will be able to follow the paper trail through identical multiple owners (same names, same or different sequence) with similar increases in transaction prices. A good source to start this search is the county tax foreclosure sale; generally when properties are sufficiently raped, they will show up at these sales. Neighborhood properties need to get back into "owner occupied hands.
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Fighting Foreclosures
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The biggest advancement involves moves that aren't apparent on the street. The city is close to completing purchases of four adjoining houses on Hendry Street, each containing three apartments. At the height of the boom, these buildings changed hands for nearly $500,000 apiece. It's a number that seems unimaginable for homes in such a crime-riddled neighborhood, but it's a sign of just how insane property investors became for a few years. Led by Dillon, the city has cut deals with lenders to buy the homes, typically spending less than $70,000 per building. Within weeks it plans to ask for bids from developers who'll gut and rehab the buildings, then sell them to someone who intends to be a live-in landlord. "We want to keep them occupied, and we want to keep this neighborhood occupied," Dillon says.
Boston is hardly the only city attempting to deal with neighborhoods that are riddled with foreclosed homes. Cities like Detroit and Cleveland have grappled with the issue for years. As the foreclosure crisis has spread, more cities are confronting the problem. The Boston Globe recently reported on how Providence, R.I., is considering levying heavy fines against the owners of buildings that are chronically vacant. Worcester, Mass., is eyeing a plan under which the city would appoint property managers for abandoned buildings, with bills for this service going to the owners. Both plans seek to increase the carrying costs for the banks and lender servicers that hold title to foreclosed properties, giving them more incentive to unload the properties more quickly.
Bruce Marks, chief executive of Neighborhood Assistance Corporation of America and a longtime homeowners' advocate, praises Menino's work on Hendry Street. "What he's doing is the right thing to do--to put pressure on the services to sell those [properties] to owner-occupants and to maintain them." Overall, though, Marks gives Boston middling grades for its response to the foreclosure crisis, pointing to cities like Trenton and Ft. Lauderdale as working more aggressively to help homeowners who are facing foreclosure but are still in their properties.
Despite those efforts, Marks says more cities are likely to face the types of problems that Boston has encountered on this block of Dorchester. "Hendry Street is an example of the future of communities," Marks says. "You're looking at a street where either half the houses are in foreclosure or are abandoned, and it's going to be the picture of American communities throughout this country."
If he's right, the city workers who nail up the plywood that keeps squatters out of these empty homes had better begin stockpiling nails.
Daniel McGinn is a national correspondent and the author of " House Lust: Americas Obsession with our Homes ."
© 2008
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