Here’s one reason bank-owned homes sit vacant

Dan Weissmann Aug 25, 2015

Here’s one reason bank-owned homes sit vacant

Dan Weissmann Aug 25, 2015

This summer, a group of Chicago men were arrested for taking over 14 vacant, foreclosed homes in prosperous neighborhoods — living in some and renting out the rest. How do foreclosed houses stay vacant so long?

One of the houses, a brick three-bedroom on the corner of 98th and Damen, went into foreclosure in five years ago.

The foreclosed homeowner didn’t move out until early 2014. Ruben Nodal, who lives across the street, remembers when a new family arrived a few months later. “I went across the street and said, ‘Welcome, neighbors!'” he recalls with a laugh. “I didn’t know. I was this close to having my wife bake them cookies.”

He didn’t know until later that the new family was there illegally; they were squatting. But he does know local real estate. He flips houses for a living.

With this house empty again, back on the market, he thinks the owner, Fannie Mae, set the $415,900 price too high.

“That’s crazy for a foreclosed home that needs a lot of work,” he says. “I know. I’ve been in that house. It’ll sell at 450, if we’re lucky, when somebody puts a hundred grand into it.”

Seven years after the financial crisis, Nodal thinks financial institutions still don’t have their act together.

“It’s bureaucracy,” he says. “They don’t care! I’m dealing with a closing right now….”

He says he’s trying to pay cash for a foreclosure, but the bank that owns the house just won’t schedule the closing.

Another local expert shares Nodal’s opinion. Maurice Hampton, who lives in the neighborhood and works there as a broker, also thinks the house on 98th is overpriced. “The banks are not realistic,” he says. “They’ve never been realistic throughout this process.”

He does appreciate the logistical challenge institutions faced after the crash, dealing with bad loans and big real estate portfolios.

“These banks went from lending money — their sole job every day, and all their employees, was to give money away —  and then it turned around to, ‘We have to absorb massive losses, and we have to pay staff who are completely untrained in finance, short sales, real estate?’ So you open up brand new departments, and these people just push paper from one end to the other with very little direction, very little guidance.”  

He’s speaking from experience. He and his wife missed a mortgage payment in 2009 and ended up in foreclosure. He says the bank wound up settling last December after his attorney documented the many times an ever-changing lineup of bank representatives had dropped the ball.

The reps would turn over every month, twice a month, three times a month at times,” he recalls.

About the house on 98th, he thinks $330,000 is more like it.

Fannie Mae executive P.J. McCarthy, a vice president in the company’s real estate division, says Fannie’s pricing savvy is worth defending. “It is not beneficial to anybody to overlist a property,” he says. “But we believe we’re very good at valuing properties, and we believe we are very good at selling those properties quickly. The vast majority of our homes sell within the first two months.”

A few days after McCarthy spoke to Marketplace, Fannie dropped the price on the house by $35,000.

Correction: A previous version of this story misstated the price Fannie Mae set for the foreclosed house on 98th and Damen. The price was $415,900. The text has been corrected.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.