The Run-down Foreclosure Next Door: What You Can Do

An abandoned home in Stockton, California.

As the housing bust continues to ripple through the nation, a growing number of American communities have been affected by home foreclosures. In August alone, 1 out of every 416 U.S. households received a foreclosure filing. That's up from 1 in every 464 households the previous month. While painful enough for those who lose their homes, foreclosures—especially vacant, unkempt ones—can undercut the property values of entire neighborhoods. In a recent interview with U.S. News, Michael Soon Lee, a broker who owns Realty Unlimited in Dublin, Calif., explained how neighbors can band together to fight the corrosive effects of home foreclosures. Excerpts:

How do foreclosed homes affect the values of nearby properties?
"It hurts the value of all the properties in the neighborhood. The first thing you learn in Real Estate 101 is curb appeal. So when people drive up to your home, you want it to really be attractive. But curb appeal also applies to the neighborhood—that's why [real estate agents] always drive people though the most scenic parts of town, which may not always be the most direct route to a property. You don't just sell a home, you sell a lifestyle and you sell a neighborhood. So if there is a rundown, foreclosed home on the main thoroughfare getting to [your] property, it's going to hurt [the value], because mentally people go, 'Oh, I wonder what's going on in the neighborhood?' "

What steps can neighbors take if they have a foreclosed home blighting their area?
"Contact a local real estate agent to see if he or she can find out which bank owns the property. Foreclosure can be a long process, and until the lender actually holds title, there's little anyone can do. Once [the foreclosed property] is owned by the bank, start putting pressure on them. Banks don't want nasty calls from neighbors; the people who work there are human, just like anybody else. You can get several neighbors together to make calls in close sequence—it's just like calling your congressperson. Build a relationship with some specific person at the bank—somebody in the foreclosure department—have a name that everybody calls and you get to know.

"Even better, have neighbors who are customers of that lender call the foreclosure department about the condition of the property. Current customers who threaten to change banks have more leverage than noncustomers. Some banks will hire a property management service to maintain the property once they own it. If you find out that a management company is maintaining the property, contact them directly."

What should you do if you're not getting any results by going through the bank?
"Your best bet is to check with your local building department and talk to their code enforcement division. Every city has a building department, and every one of them has a code enforcement division. They recognize that blighted properties hurt the entire city, so they have a vested interest in making sure the properties are maintained, and most have the ability to levy fines and penalties against the lender—or whoever the owner is."

Have you ever seen that happen?
"Oh, yeah. The lender doesn't want to have problems with the city because it could make it difficult to sell [the house]. Technically, if you don't pay your fines, the city could put a lien against the property, and then they can't sell it."

Would you recommend that neighbors go and maintain the property themselves?
"Remember, this is not your property. But we in real estate call that the 'stealth neighborhood improvement program.' I've done it. I've had properties where the next-door neighbor wasn't keeping it up, and as a Realtor I really want our neighborhood to look its best; it keeps everybody's value up. So if their sprinkler isn't working, I'll make sure to hit it with a little bit of water. If the weeds get a little bit high, I'll sneak over when it's quiet when I'm cutting my lawn, and I will just happen to end up doing their lawn as well. Look at it like this: You are not doing damage to their property, you are actually improving it. So how much liability do you really have? It's probably very minimal."

What's another way that neighbors can prevent a foreclosed home from blighting their community?
"Homes that are sitting abandoned are an opportunity. So you can let your friends, relatives, and anyone else that might be interested in moving into your neighborhood know about it. Let's get this sucker off the market, let's get [someone] to buy it. You're likely to get a great price!"