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» VISIT US ONLINE @ DSNEWS.COM 73 COVER STORY INDUSTRY INSIGHT INDUSTRY INSIGHT INDUSTRY INSIGHT adversely affected by foreclosures and abandoned (or otherwise vacant) properties. According to Klein, quite simply, a foreclosed home will be a depreciated one, which then detracts from the community and its housing comparables. is, in turn, leads to decreased value for nearby residents and depleted tax bases for municipalities—as Klein puts it, "a cascading cycle of value destruction." Tapping an array of economic data and academic analysis, his study, which was commissioned by Community Blight Solutions, found that the typical foreclosed home costs more than $170,000— approximately half of which is directly associated with property vacancy and condition. e correlation between housing vacancy and crime unsurprisingly increases the longer a property stays vacant, likely plateauing between 12 and 18 months. e white paper also found that vacant residences account for one out of every 14 residential building fires in America. To isolate the impact of foreclosure and abandonment versus just foreclosure, Klein cited research conducted by the Federal Reserve Bank of Cleveland (FRBC). Of 9,000-plus single-family homes in Columbus, Ohio, slightly more than 6,000 had been foreclosed on, while 4,152 were vacant/abandoned. Foreclosure and abandonment are multiple layers of loss that radiate out to other residents and the corresponding municipality. e FRBC study discovered that more than half of the total cost of a foreclosure's impact on neighboring properties is due to the property being abandoned. e white paper ultimately concludes that a vacant property triggers losses and additional costs of approximately $150,000 in its first year: $133,000 from reduced property value for neighbors, $14,000 in increased crime, and $1,500 in added expenses for the police and fire departments. "ese costs last over time," Klein wrote. "For every additional year the property sits vacant, the crime and police costs add up. Even after the property is sold, neighbors will lose at least $25,000 for two years and quite possibly longer." It's the laborious foreclosure act and system that bring about the home vacancy. Properties in Q3 2016 took an average of 625 days for foreclosure completion, according to the National Association of Realtors—but it's the latter state of the property that drives the majority of the losses, including the increased likelihood of crime. WRONG KIND OF OPEN HOUSE Time is money, but it is also exposure. Investors speak of exposure in terms of the amount of money that can be lost. e often- lengthy timeframe of a foreclosure process becomes problematic because it exposes a community to blight and destabilization. An abandoned home is susceptible to weather and fire damage, crime, degradation from lack of maintenance, and much more. "As each property becomes vacant, it becomes an attractive nuisance that draws the attention of less-than-desirable elements," Salimbas said. "is double-edged sword not only drags down nearby property values, it also reduces comparable values that are used for determining the REO list price, which reduces the net recoverable during disposition of the foreclosure even further." An abandoned and often-abused house acts as a value vacuum, hurting not only the homeowner but also the surrounding neighbors and the mortgage actors with a stake in the foreclosure process. "Additionally, the asset is a financial drain," Salimbas said. "As a nonperforming asset, it is not generating revenue during the nearly two- year-long foreclosure cycle." Seeing, in this case, is not believing—not believing that anyone cares about the property or that there will be repercussions for abusing it. Blight starts the second a casual observer can identify that a property is vacant with poor lawn maintenance or the more obvious eye sores such as boarded-up windows, according to the Agios CEO. "When a vacant property is hard to identify when someone cannot hide behind a barrier and is exposed to all who pass by, it mitigates those negative elements," Salimbas said. "Overgrown lawns attract rodents and eventually snakes. Boarded-up properties attract squatters, drug dealers, and vandals, who strip the copper piping and wires from the house. Occupants from neighboring properties know that criminal elements can quickly identify those properties and that those properties will get damaged and pose a risk to their health and safety as well." NEIGHBORS IN NEED Knowing is half the battle before and during "When a vacant property is hard to identify when someone cannot hide behind a barrier and is exposed to all who pass by, it mitigates those negative elements. Overgrown lawns attract rodents and eventually snakes. Boarded-up properties attract squatters, drug dealers, and vandals, who strip copper piping and wires from the house. Occupants from neighboring properties know that criminal elements can quickly identify those properties and that those properties will get damaged and pose a risk to their health and safety, as well." - Steve Salimbas, CEO, Agios World Wide, Inc.

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