Jeremy Klein pays his bills and keeps up his house, but still has become a victim of the spreading home foreclosure crisis. His next-door neighbor went into foreclosure, and that dragged his property value right down with it. Klein and his family bought the house in Central Berwyn for $260,000 at the height of the housing market in July 2006. When his neighbor’s house went into foreclosure a year later the bad news began for Klein.
In August 2010, Klein and his wife made an executive decision to move so that they could more easily commute to and from their son’s hospital for his therapeutic care. By the end of the month the house was up for sale for $40,000 less than they bought it.
“We have not had a single person walk through the house and it will be dropped down to about $90,000 less than what we paid when we relist in the spring,” Klein said.“The house is in good condition and sits in a good neighborhood. We’ve made upgrades over the four years that we have lived in the house but … not a single person.”
The house remains empty and the only traffic that goes through is a police officer checking in.
Unfortunately, Klein’s story isn’t an isolated one. Foreclosed houses drag down entire neighborhoods – even if they are well maintained.
That’s largely because house-hunters come to snap judgments about a neighborhood when they see a foreclosed home – no matter how well the neighbors maintain their houses, according to Jim Merrion, regional director of RE/MAX Northern Illinois.
“The bottom line is this, people like to have a consistent neighborhood. One where people are cutting their grass and painting,” Merrion said, “Sadly, when you have a neighborhood with houses that are boarded up it pulls down not only the block, but the entire neighborhood.”
Foreclosure has been a rising epidemic in the real estate business since the housing market crash. It has hit places like Berwyn and the surrounding areas hard. In this year alone, there have been 795 new and active mortgage foreclosures according to www.Trulia.com.
NSP Funds are introduced
The bad effects foreclosures have on neighbors’ property values is so great that Congress passed a bill in 2008 to tackle the issue. The Neighborhood Stabilization Program (NSP) seeks to stabilize communities hurt by foreclosures and abandoned properties through the purchase and redevelopment of those properties. Berwyn received $1.3 million and then another $1.8 million through NSP to accomplish these tasks. According to public record, the Berwyn Department of Community Development has purchased a total of 17 properties. Most of them are single family homes, but Berwyn has also invested in condos and two-flats.
Surrounding cities have also felt the sting of the foreclosure crisis. But other cities handle the problem in other ways. The city of Maywood, which is smaller than Berwyn, has seen 578 foreclosures this year.
Chris Donovan, a member of the board of directors for Housing Helpers in Maywood, sees first hand how NSP funds are handled in different ways. The West Suburban Collaborative NSP application that covers Berwyn, Oak Park, Forest Park, Maywood and Bellwood aren’t using the same tactics. The collaborative fought for Maywood to use their portion of the NSP to rehabilitate single family homes like Berwyn has been doing, but Cook County made the final decision. They chose to spend $2.7 million on one 20-plus unit apartment building.
No matter the city, NSP funds can make a difference to home owner’s effected by foreclosures.
“Everyone is underwater. A lot of people can’t get their mortgages modified because their house is worth less than they owe,” Donovan said, “At least Berwyn is making an attempt with every house they sell to replenish the funds.”
Advice and the future
Merrion believes that the housing market will turn around and adjust to our economy. New trends in real estate are already coming up. Due to gas prices, houses that are closer to public transportation and houses that are closer to the center of a city are now considered more desirable.
Merrion also offers two pieces of advice for people like Klein who are looking to sell their house. Make sure their house is in great condition when it comes to home improvement and clutter, and price competitively.
“We suggest underpricing just a touch. If you’re just a bit under the market price you will stand out as a better buy,” Merrion said.
Klein’s situation is a tough and common one. He has hopes like any other home owner in his situation, yet he also understands the depth of his predicament.
“In our situation I would love to be able to hand the keys back to the bank, forget the money we have in the house, and move for the sake of my son and my wife.” Klein said. “In February she will have to quit her job in order to continue taking care of our son, but banks can’t do that and they shouldn’t. It’s just a tough situation for a lot of people.”