“WHY HAS THAT HOUSE BEEN EMPTY FOR OVER A YEAR?”

August 1, 2011

By John Mangas, real estate broker

Toledo, Ohio

I hear that simple question almost daily. Unfortunately that answer is anything but simple.

The foreclosure segment of the Toledo real estate marketplace continues to be a confusing and frustrating place to do business.

Consider this example: today one of my agents who is representing a buyer came in to seek my advice relating to the transaction. Her client, the buyer called her today very upset after speaking to a representative of the Sheriff’s office. It’s seems as though she was told that by purchasing that home she was breaking the law and is subject to prosecution! The representative from the Sheriff’s office went on to explain that they are working on December’s business… meaning that the buyers cannot close on the property until December because that’s how far behind the Sheriff’s office is in processing the deeds. The buyer’s financing is approved, the inspections are complete and they are ready to close.

So, why not close it now? It seems logical, right? We have a ready, willing and able buyer that wants to move into this property and make it home so what’s the hold up?

There are many forces at work. Let me begin by addressing the allegation that the buyer had committed a crime viewing, entering and writing an offer; the Sheriff’s office has taken the position that the owner of the property is the party shown on the deed, period. While this may seem simple, this position fails to take into account the interest that the lien holder or owner’s lender has in the property. Most standard mortgage documents have “loss protection” language in them. When the property owner signs those documents to get their loan, they give away some of their rights to the property. What this means is that in event of abandonment, the lender has the right to cut their losses by taking control of the property, securing and marketing it. Also occurring at this same time is the foreclosure process giving the owner their due process under the law. This difference of interpretation is the basis on which the Sheriff’s office representative was staking her position.

The lending industry nationwide considers securing and marketing the asset as standard practice. In fact the Superintendant of Real Estate for the Ohio Division of Real Estate seemed surprised in a recent conversation that I personally had with her that the Sheriff’s office was taking this position. As I went on to explain that the delays in getting deeds prepared by the Lucas County Sheriff’s office, it then became apparent to the Superintendant why this issue is being raised. In most other counties in Ohio the “norm” to process the deed is less than 90 days.

Let’s go back to where we began…we have a buyer who’s ready to close and take possession. Simple, right? Obviously not. What will happen to the home that this buyer has invested an appraisal and a home inspection in between now and December is anyone’s best guess. Will the siding be pulled off? Copper stripped? Will it freeze up and become damaged before closing? What is the effect that this vacant property is having on the homes surrounding it?  If, or better yet, when one or more of these events occurs, will the buyer still want the home? And if so at what discounted price? When the price is renegotiated and the deed is recorded the closing can occur which means that the lender is receiving less, but it also means that Lucas County is receiving less in terms of the transfer tax. The transfer tax paid to Lucas County is based on the sale price of the property so as the property becomes less valuable, the County receives less revenue. By the way…those neighbors who are living nearby and are struggling to make their mortgage payment on time steadily see their own property value decline as in part because of foreclosure properties like this one.

So, what are the solutions? There are several options to choose from. Sheriff Telb recently addressed the Toledo Board of Realtors and indicated that based on budgets and staff cutting that they are doing the best that they can. In a recent meeting with one of the County Commissioners and the County Administrator we discussed this issue at length. Most banks going through the foreclosure process would pay an additional fee for an “expedited deed” (a deed that is produced in 60 days or less). The filing fee structure needs to be looked at as well. Then of course there is the revenue that comes from the County transfer tax being administered when the initial offer is accepted. Two Title Agencies have come forward and offered to assist the County in catching up the back log of deed recordings. This was suggested to the Sheriff and County Commissioner, but in checking prior to writing this, no one has contacted the Title Agencies, other than myself. There may be additional solutions, but this combination would go a long way to streamline the process.

Admittedly this is a complicated process. There are sufficient resources available to seek out solutions that benefit the community. Having the will to do so on the part of the County Commissioners and Sheriff’s Office seems to be what’s missing.