In Defense Of Vampire Foreclosures

In Defense Of Vampire Foreclosures

By |October 16th, 2013|

vampire foreclosures defendedMove over Dracula, there’s a new kid in town – the vampire foreclosure.

RealtyTrac, a company that compiles and publishes information about the housing market, has coined a new term.

Vampire foreclosures,” refer to bank-owned homes  still occupied by the former owners.

The press, ever hungry for a news story that shows an America in crisis, is sucking every drop out of this one.

But I can’t help but wonder whether the vampire foreclosure isn’t such a bad thing after all.

Keep Houses Occupied, Keep Neighborhoods Vibrant

As a child of the 1970s in New York City, I vividly remember driving through The Bronx and noticing all of the boarded-up buildings.

This was the time of Fort Apache, rampant crime and a general sense of, “do not go to The Bronx ever, under any circumstances, unless you place very little value on your life.”

Things were so bad that then-mayor Ed Koch spent $300,000 on decals to cover up decaying windows.

Now, banks are leaving former owners in their homes rather than letting the properties go vacant.

Kids continue to play in the streets, and the trash gets hauled away on a weekly basis rather than piling up at the curb.  Cars drive through the neighborhood, leading to increased vigilance on the part of the residents.

Someone waters the lawn.  At night, lights come from living rooms.

Life goes on, rather than stopping and leaving a ghost town. This is the stuff of neighborhoods, and is what makes an area more attractive to new residents as opposed to new investors.

How is this a bad thing for the fabric of society?

Banks Holding Back The Tide Of Foreclosures

The flip side of the argument is that, by not releasing the properties to the sales market, banks are artificially propping up the housing market. Reduced supply, after all, drives up prices.

Mortgage experts will say that this shadow inventory is sure to cause an avalanche of properties hitting the market … someday. But what they don’t understand is that for the first time the banks have the exact same interests as homeowners.

The banks want these properties to fetch the highest possible prices, so they won’t release all of them for sale at the same time. Rather, they’ll dribble them out over time.

Homeowners want their homes to retain as much value as possible. They want the vampire tenants to keep watering the lawns and taking out the trash.  They have a vested interest in keeping the neighborhood a vibrant one, if only to protect their own resale value.

Cities Face A Shrinking Tax Base

When the homeowner loses the house in foreclosure, there’s not much motivation to keep paying the taxes. Sometimes the bank will step in to foot the bill, but that’s not always the case.

Cities and towns are disturbed that the reduction in tax revenue cuts into the bottom line. But the city can decide to foreclose on the house for unpaid taxes, or even (as one city in California is doing) take the house through eminent domain.

See also:

Either way, the cities have a way to get their money in the long-run.

Maybe Vampires Aren’t All Bad

As a nation, we’re struggling with the effects of the foreclosure debacle. Banks continue to press forward, homeowners, keep on trying to right their financial ships.

Until things are sorted out and we can all get back on our feet, perhaps the vampire foreclosure problem isn’t so much of a problem.

Perhaps, it’s an unintended way for homeowners to keep from becoming homeless and to prevent communities from disintegrating.

Time will tell how it plays out, but the upshot is that sometimes a vampire’s kiss isn’t always such a bad thing.

Image credit:  Conekt

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.