The New York Times ran an interesting piece yesterday on how banks are in some cases refusing to take back some properties where the mortgage is in default! 

City officials and housing advocates… in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.

Admittedly, I have not seen this phenomenon locally.

It’s worth noting that the “varied” cities named are all much older than Las Vegas (founded in 1905, incorporated in 1911, things didn’t really get rolling until Hoover Dam began construction). All but a few hundred all of our houses for sale were built in the last 50 years. Over 3/4 were built in the last 20 years, and more than half of them were built in the last 10 years using relatively modern building techniques. The age of available housing is very different in cities like Buffalo or Jacksonville, and that impacts the condition of that housing.

Another wrinkle here is that Vegas has a lot of HOAs — Home Owner Associations — and in Nevada they have the legal right to foreclose on property when the dues and assessments are not paid. They can even foreclose when fines for things like failing to mow the lawn aren’t paid. I haven’t seen any houses for sale by HOA yet, but I have seen sales held up by an HOA starting the foreclosure process. 

It’s not a sale until Close of Escrow, and the foreclosure isn’t done until the deed is recorded in the bank’s name.