Perhaps an Aggravating Thread Should Not Be Pulled

I have always said that if you torture a number long enough, it will say whatever you want it to say.

I believe that is the case with a recent study conducted by the Federal Reserve Bank of Cleveland.

The study claims that foreclosed upon properties that are vacant have a lesser negative impact than those which are occupied.

News of the report first surfaced in Housing Wire, an online magazine covering financial news for the mortgage market.

But as you know, I tend to be suspicious of such studies as nobody can agree on what assumptions are valid / invalid.

Absent from the Housing Wire report were the calculations used and the assumptions which led to them. If there is ever a weenie to be found in any study, one can usually trace it to the assumptions in the research design.

The differential between occupied vs. unoccupied properties was .1%.  This is not a very large discrepancy and frankly, I find it very hard to believe.

In every case I have ever witnessed, when a homeowner remains in a home that has been foreclosed upon, until that home is sold, the property is maintained and it looks as if it did when all was well and good.

Now, if the problem is that the foreclosed upon homeowner is not doing anything to warrant “curb appeal”, the numbers make absolute sense.

Curb appeal is the effort one makes at attracting a buyer with small improvements like the additions / revival of flowers upon walkways, trimmed hedges, and perhaps repainted window trim and eaves. 

Of course, this is not the responsibility of the former owner after a foreclosure occurs.

However, servicing companies such as HomeEq (a particularly incompetent and underhanded organization from Sacramento, CA) are responsible for such maintenance. 

I personally witnessed a home in my neighborhood remain intact during a protracted fight for modification which ultimately led to the removal of the homeowner.

Fair enough.  What happened afterward was abysmal.

HomeEq did nothing to maintain the home.  The pool in the backyard turned black and led to a mosquito infestation, while the yard and gardens, formally gorgeous with rose bushes and plumeria trees, were relegated to the elements.

The yard is now brown, and the home is somewhat of a blight.  I knew those owners.  They offered to do whatever was necessary to keep the property up until it was sold including full cooperation with realty agents in the schedule of open houses, etc.

They were good people who invested a tremendous amount of money into the home without refinancing.  The actions or, inactions of HomEq led to reduced property values on the area, not the occupation status of the home.

And this is why we must always examine the assumptions of any study in order to understand the results with any clarity.  I assure you, the foregoing scenario has been repeated unchecked.

I do not know this for a fact, but then again, I am confident that if the data were examined and the actions of the servicing agents were plugged into the formula, the common thread being obstinacy on the part of companies like HomEq.

And as we all know, pulling the wrong thread can unravel the most tightly wound fabric…

Appraisal Source is a New York based residential real estate appraisal firm. Their highly-qualified appraisal staff of New York City and Long Island real estate appraisers provide independent residential real estate appraisals for a variety of purposes.

Here’s the original article…Study finds foreclosures harm home prices more than vacancies

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