Q: I live in the Northeast, but hope to move in the spring. I have neighbors who said their mortgage is higher than their home is worth. This week they decided to simply move out and let their mortgage company take it. I now have a vacant home on my block. What will happen now?
A: Your neighbors have elected to default on their mortgage and leave in their wake lower home values in your neighborhood. The fact is, no matter what the defaulting homeowners’ excuse, foreclosures decrease nearby home values.
Depending on how behind in mortgage payments your neighbors were, the home may still be vacant in the spring, because it usually takes several months before the bank forecloses. It is unlikely to be sold at sheriff sale, since they owe more than it’s worth, so it will become bank-owned property.
It may take another several months before the bank gets the property on the market, and when it does, it will likely be sold below market value. And, depending on your neighbor’s bank, the process could even take longer since some banks have recently self-imposed a moratorium on foreclosures, which may mean a back-up on foreclosures.
Unfortunately, there is nothing you can do when your neighbors make bad decisions. Maybe they don’t care about the neighborhood they’ve left behind, but they should care about their wrecked credit score, judgments for their unpaid taxes, or their inability to buy again. Some people, however, don’t realize there are other choices like loan modifications or short sales. And some really don’t have another choice.
Stacey McCarthy is a real estate agent with the McCarthy Group of Keller Williams. Her Real NEastate column appears every Wednesday on NEastPhilly.com. See others here. Read other NEast Philly columns here.