People stripping house before foreclosure

nancyinmichJuly 24, 2008

I have noticed ads on Craigslist lately where people are trying to sell the kitchen cabinets, light fixtures, furnace, air conditioning and other "attached" parts of their houses. When there are multiple mechanicals and cabinets being sold, I have to believe that the homeowner is stripping the house to get every dime out before it is repossessed by the bank. I can't imagine that the bank can do much with a house with major systems missing.

Triciae (and others in the business), when you were doing work-outs and foreclosures, did this happen often? Does the bank prosecute these homeowners for stealing the mechanicals and kitchens?

The ad below is pretty obvious because so many systems are being sold. But sometimes people sell a fairly new kitchen because they want to remodel. If you go see something for sale and when you go to look at it, you suspect that the house if being stripped like this, what are you morally obliged to do?

- Buy at the best possible price and get out fast?

- Call the cops about a theft in progress?

- Look up the mortgage holder in the county records and notify them?

Also, if you are duped into thinking that they are just replacing the kitchen cabinets soon - but someone comes to foreclose on the home while you are taking the cabs off the walls, who owns them? Are you at risk for arrest for theft if you bought them not knowing that the house was being stripped?

Here is a link that might be useful: For Sale on Craigslist

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reno_fan

I'm not Tricia, but am a Realtor. This happens a LOT. It's not unusual to go view a bank-owned home that has no appliances or light fixtures, etc.

I don't technically think the bank can go after the owners, as most of them strip the house *before* the bank actually takes it over in foreclosure, meaning the house would be stripped when it was still under title to the owner.

Hopefully Tricia will chime in.

    Bookmark   July 24, 2008 at 8:06AM
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livvysmom

I also noticed this on Craiglist. The cabinets were very new looking Maple so it was obvious they weren't remodeling!

    Bookmark   July 24, 2008 at 8:24AM
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triciae

It's always happened but not to the extent we're seeing today. For instance, from '87 thru '92, I probably had less than a dozen houses that were stripped from of a couple thousand foreclosures in NH. Those few cases were all whacky borrowers who had more problems than just stripping cabinets. A couple are still in the slammer for much bigger crimes against the bank.

Yes, I have filed civil suits in a tiny number of cases but was only successful in those where my borrower was also facing crimminal fraud charges. In bad times, judges just don't want a bunch of these petty suits. And, they are petty in the overall scheme of problems facing banks.

In theory, it is illegal to knowingly purchase stolen property. In reality, nobody is going to pursue.

It's irritating to lenders but falls under the category of "don't sweat the small stuff...concentrate on the big picture". Falling property values are a much larger problem than a property stripped of its furnace. I know, I know...these stripped houses fall in value. But, it's really small potatoes to a lender facing losses like Wachovia just posted...something like $9B?

If anybody's interested...here's a legit non-profit that resells cabinets & other 'stuff'...

/tricia

Here is a link that might be useful: Green Demolitions

    Bookmark   July 24, 2008 at 9:07AM
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terriks

Not only is this a problem, but apparently there is a huge problem of homes being stripped of all kinds of things by thieves after foreclosure. Walls are being destroyed to get to copper piping behind them, flooring is removed, etc. Anything that can possibly be sold is stolen. The news story that I saw said that it was such a problem in Atlanta that a special police squad was formed to handle only these types of crimes.

    Bookmark   July 24, 2008 at 10:46AM
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triciae

I guess the question, "Why are people behaving so poorly today as compared to the last two real estate crashes?", should be asked.

Is it, perhaps, reflecting society's overall lessening of personal accountability?

Breaking & entry into a foreclosed home to strip copper pipes is a crime & should be pursued. An owner taking cabinets out of a house before foreclosure is tough to prosecute.

/tricia

    Bookmark   July 24, 2008 at 11:01AM
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suburbanmd

I'm surprised mortgages don't include provisions to make stripping a violation of the agreement, and allow penalties for it.

    Bookmark   July 24, 2008 at 11:34AM
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triciae

There are clauses in mortgages that cover such things, suburbanmd. The issue comes in trying to enforce those clauses. If an owner/borrower removes, say, $5K of cabinets, appliances, etc. the lender will ask, "How much in attorney fees to chase this guy & what are my odds of recovery?" It's a civil issue. Now, if a house has been foreclosed & is sitting empty & somebody breaks & enters...that's crimminal & will be prosecuted by law enforcement.

/t

    Bookmark   July 24, 2008 at 12:22PM
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suburbanmd

Why do these clauses require legal action, when fines for other infractions (e.g. late payment) can be added to the borrower's account unilaterally?

    Bookmark   July 24, 2008 at 12:39PM
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triciae

Well, one reason is because value must be established for the items supposedly taken from the property.

If you read a mortgage you'll see that a lender can call the note due & immediately payable if the borrower fails to do all sorts of things...maintenance, insurance, taxes, make the note payments, etc. It does not, however, list every item appurtenant to the property & a corresponding value. The late penalties you refer to are established in the Promissory Note not the mortgage. The mortgage is a securitization document that includes remedies such as calling the Promissory Note due and/or foreclosure.

I have, on rare occassion, gone to Court & received an emergency injunction to stop a borrower from removing property . They were extreme situations & involved construction loans where thousands of dollars worth of materials were on-site but not yet installed. My borrowers were heading towards BK & were removing the uninstalled property (paid for by the bank thru the regular draw process). That type of property (not yet appurtenant to) is covered by the UCC (Uniform Commercial Code) documents that create a lien similar to a mortgage...at least for the purpose of this discussion.

In those cases, the judges issued injunctions against my borrowers. In theory, I could do the same thing with a borrower snatching snazzy door hardware but it costs the bank money for the attorney to file the injunction, attend the hearing with before/after pictures, receipts, & other evidence & follow-up with me after the hearing. As a lender, I'm not going to do that for a few thousand dollars of cabinets. Now, if a borrower is basically removing the house...board by board...in other words, an extreme case, that's another story & a lender will act.

/tricia

    Bookmark   July 24, 2008 at 1:06PM
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suburbanmd

The lawyers ought to be able to come up with a clause that doesn't rely on establishing value. Something like, "If the house is left in uninhabitable condition due to missing or inoperable fixtures, you owe us the greater of $25,000 or the cost of returning it to habitable condition."

    Bookmark   July 24, 2008 at 1:50PM
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jeri

There was an article in last months "Time" (I think it was Time) telling about how banks have "Cash for Keys" programs where the bank will give the people being foreclosed on a cash incentive to NOT destroy the place. I was shockedÂ

    Bookmark   July 24, 2008 at 2:16PM
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triciae

LOL

suburbanmd, it doesn't sound like you've done many lender home inspections? By your mortgage clause a goodly number of mortgages would be getting hit with your fine! You'd be surprised at how many people live with "uninhabitable" & "inoperable fixtures" as a lifestyle choice. It's downright scary. :(

Anyway, unless there's a collectable deficiency judgment what good does it do?

Define "uninhabitable"? Would the missing $10K chandelier in the dining room that was replaced with a HD cheapo qualify? What if you were in the middle of a major remodel having already torn out the old kitchen cabinets, appliances, & flooring then lost your job; thus becoming delinquent on your mortgage payments? Would that qualify for your fine?

There's already enough clauses. The lender has ample remedies. The devil is always in the details...as in, collecting on those remedies. Decisions are bottom line oriented. If I can't collect, a mortgage clause or a judgment is worthless and that is the vast majority of cases. If a specific situation is different then the lender will make different decisions.

/tricia

    Bookmark   July 24, 2008 at 2:34PM
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nancyinmich

Yes, it seems to me that trying to collect money for stealing the cabs and furnace is a bit of a lost cause if a homeowner can't pay the mortgage payments. If the person is not making payments, how would adding a fine help?

Are those who let the home go back to the bank ever forced to pay money to the bank, or do they just walk away with ruined credit? I believe that most people think it is the later.

I don't know for sure about this theory of mine, because I have moved up in socioeconomic brackets over the years. I don't have a good handle on what is "normal" for all, and what is just different now because I am in a higher income bracket,,, but forty years ago, we never considered changing serviceable kitchen cabinets. People just used what came with the house, painting or refinishing them as they liked. Painting the cabs, painting the walls, getting a new vinyl floor, new Formica, a new faucet, and maybe a new stove or garbage disposal was a "kitchen remodel" when I was young. Nowadays, even the working class homeowners will actually change out the cabs, sink, lighting, tile - down to the walls. Light fixtures in a home will be changed for style, not just when they stop functioning. People have been paying more attention to these parts of their homes and are aware of them more. They put more thought, money, and time into them than in the past, so are more aware of their value. So they take them out and sell them before the house goes back to the bank.

I also believe that many people feel that they did not do anything wrong in purchasing a house that they cannot now afford. With all the media attention focused on mortgage lenders, people feel "duped" and "taken advantage of" rather than feeling guilty for making a bad choice of mortgage and buying a house above their means. The media coverage of foreclosure relief adds to this. "Predatory lending" was not a term used for mainstream loans until recently. It was those fly-by-night con-men who did predatory lending, not the bank on the corner, not a nationally advertised loan company. This gives folks a sense of entitlement. They are being victimized, so they will get what they can before the evil bank that duped them out of their house gets it back.

Any comments?

    Bookmark   July 25, 2008 at 12:39AM
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nancyinmich

Terriks, I guess if they stripped out the furnace, we better hope that thieves take the water pipes, too! Up here, a lot of basements will turn into swimming pools if no one turns off the water and empties the pipes before freezing weather comes.

    Bookmark   July 25, 2008 at 12:44AM
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secsteve

We have a house here for sale by the bank at a ridiculous price. Talk about gutted! The basement was deliberately flooded, what was once a cooks dream kitchen is in shambles, carpets are disgusting, marble (Yes marble) entrance looks like it was used for a skating rink and the kicker - a room has been completely removed! I mean walls, electrical sockets, vents and windows. I won't even go into the state of the bedrooms and baths.

The price? $550,000. It will take at least $400,000 worth of work to make it habitable according to a realtor friend.
Makes you wonder what folks think they are accomplishing by doing this type of stuff.

    Bookmark   July 25, 2008 at 7:48AM
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notrafficinga

We lived without our master bath for two years while we decided on a course of action. I tore out two walls of tile before discovering that the grout was the only thing holding on the tile on one half of a wall. Suddenly, re-tiling and new fixtures were not all we were going to have to do. Since it was shower only, I juggled with tub options, etc. Adding to that, we didn't know if we would sell or stay. We used the guest shower. This probably happens a lot, and then people run into trouble with their bills. We finally re-did the shower only and put it on the market. It didn't sell and it is now rented. I am glad I took the less expensive route, but perhaps the tub would have helped resale. Water under the bridge.

It wouldn't be fair to further punish people in this situation. When someone can't pay a mortgage, how are they going to pay a $25,000 fine because they ran out of money during a bath remodel?

    Bookmark   July 25, 2008 at 8:50AM
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suburbanmd

The "can't squeeze blood from a stone" argument doesn't stop servicers from imposing additional fees on delinquent borrowers, or so I've read in the media. Nor does a sense of fairness. I imagine they must get some money out of some borrowers, even if they can't collect from everyone.

    Bookmark   July 25, 2008 at 12:12PM
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stir_fryi

In some cases, the mortgage company is getting what they deserve.

A certain company loaned a relative over $125,000 in home equity for a house worth $140,000 and with a fixed monthly income of $1600. What are they - stupid? A three year old could do the math and figure out that eventually the person will not be able to pay. I might add the relative was an addicted gambler.

Now they are stuck with a disgusting, outdated house in one of the worst markets ever.

PS: the last mortgage statement said in big, bold letters "you may be entitled to receive $13,000 cash from your home's estimated available equity to do whatever you want with it!"

What a joke.

Desperate people do desperate things. Selling cabinets may seem criminal but if you are trying not to lose your car or feed your kids.... Not saying it is right, just that I understand.

    Bookmark   July 25, 2008 at 12:24PM
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scootawop

"We have a house here for sale by the bank at a ridiculous price...$550,000. It will take at least $400,000 worth of work to make it habitable...Makes you wonder what folks think they are accomplishing by doing this type of stuff."

Why on earth is the bank demanding that much money for a gutted foreclosure house? THAT'S what you should be questioning.

    Bookmark   July 25, 2008 at 1:42PM
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igorz

I have 2 buyers who just couldn't get loan on gutted out house. Supposedly certificate of occupancy needs to be issued prior to lender releasing money. Does anybody have an idea who (and how) people obtain loans to purchase in this situation? Are they all cash transactions?

    Bookmark   July 25, 2008 at 2:50PM
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triciae

Construction loan that converts to a permanent. These days that will require the buyer to have some 'skin in the game'...unlikely to find 100% financing.

/t

    Bookmark   July 25, 2008 at 3:52PM
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dreamgarden

triciae-Breaking & entry into a foreclosed home to strip copper pipes is a crime & should be pursued.

The scrap yards that are buying and reselling this stuff should be held accountable as well.

    Bookmark   July 26, 2008 at 12:18PM
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blueheron

In a similar vein, a friend of mine bought her condo from a German man and when they did the walk through, he had stripped the condo of things that are usually left, like stove shelves and closet racks, etc. Very weird, but evidently they do that in some parts of Europe.

    Bookmark   September 9, 2008 at 8:53PM
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bushleague

I'm involved with one currently which flooded when the baseboard heating system pipes burst because the bank never had the system winterized. Most of the first floor is oak strip which buckled as well as the OSB subfloor, easy fix. Wells Fargo will write a 203K rehabilitation loan for 100% of the purchase price. Only new homes need CO's in order to close in MA anyway.

    Bookmark   September 10, 2008 at 10:17PM
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