Foreclosed Houses Lowering Values Of Non-Foreclosed Units

January 18th, 2008

With the number of foreclosures running into thousands the banks in Cleveland are finding themselves drowning from the load. They are being compelled to offer these houses for sale at one-third their original price. This has led to the valuation of other houses not in foreclosure to drop.

The sale of foreclosed houses have gone up four times in Cleveland and Cuyahoga County since the turn of the century. During the past seven years 24,000 residential estates had been listed in foreclosure sales. This is 8.8% of the total residential units in the city and 3% of those in the suburbs. The matter does not end with prices – the spill over is far more dangerous. Abandoned houses are attracting criminal activity and vitiating the entire region making it unsafe for human habitation.

While a house is in foreclosure the authorities do not have to be paid taxes. It is the buyer who pays all past tax dues before getting the title deed. With thousands in the foreclosure zone and with no buyers in the market collection of taxes has drastically dropped. The city of Cleveland sued 21 giant banks alleging that their sub-prime lending operations have made them to be public nuisances. Property value and tax collection has been badly affected because of them.

The report drafted by Claudia Coulton has been circulated among civic committee working members. She hopes that the observations will help the lawsuit.

The second such challenge came from Baltimore city. Baltimore sued Wells Fargo for intentionally selling high rate interest mortgages more to the blacks than to the whites. This is in gross violation of federal laws. The bank however has denied the charges saying that its activities are not based on race consideration.

Last November a report was compiled by a conference of Mayors. It apprehended that in 2008 as many as 361 metropolitan regions would be hit by a loss of $166 billion because of the foreclosure fiasco. More and more houses were being abandoned. This was causing a loss for all concerned – lenders, borrowers and society at large.

The value of foreclosed houses is calculated by dividing the sale price by the market value as assessed by the county auditor. Coulton commented that in 2006 the real estate scenario was upbeat because of overestimation of market values.

Deutsche and Wells Fargo bought most of the foreclosed properties in the foreclosure auctions in 2006-2007.