It's estimated that approximately 620,000 foreclosed properties in the United States are owned by lenders. But a majority of these properties have been abandoned and left to rot for more than two years, thereby reducing property prices and investment potential in these areas.
The neglect of foreclosures is one of the reasons for the L.A. city attorney’s office filing a case against the U.S. Bank. The office accused the bank of not maintaining more than170 foreclosed properties, leading to decreased property values and increasing crime rates, CNN reported. A similar lawsuit was filed against the Deutsche Bank last year.
Across the country, there are a number of boarded-up properties with real-estate owned (REO) status that is slowly losing its value in the market. These homes have unmowed gardens, are littered with trash and infested with of rodents. This reduces the salability of the house and “the longer a property spends in REO status, the greater risk of falling into disrepair and dragging down the quality of the neighborhood and value of surrounding homes," Daren Blomquist, vice president of RealtyTrac told CNN.
According to the Portland Business Journal, this problem emerged mainly because homeowners had their mortgages sold to investors around the globe in the frenzy before the housing collapse. Figuring out who owns such homes has now become a problem and has resulted in properties being left to rot.
Surprisingly, REO homes in White neighborhoods were cared for in a substantially better manner than those in communities of color, a study by the National Fair Housing Alliance reported. Homes in colored communities appeared vacant, blighted and unappealing to real estate agents who might market the unit to homebuyers, but REOs in White communities generally appeared inhabited, well-maintained and attractive to real estate agents and homebuyers, the report showed.
“The inferior way in which banks maintain and market their REO properties in communities of color actually changes the character of and serves to degrade the quality of life in these neighborhoods,” the report said.
