It is common knowledge that foreclosures can have negative effects on all of those involved. The borrower ends up losing their home and the lender is stuck with a home that carries a mortgage debt they are not likely to recoup. The negative effects can reach even further than those directly involved and many neighborhoods and communities are impacted by the effects of a foreclosure.
Declining property values, turning away potential buyers and an increase in the crime rate are all common for homes that neighbor a foreclosure. Now, there is evidence that a foreclosure can even cost the entire city and spread to into the tax base.
A City Suffers
Foreclosed homes typically result in additional problems such as overgrown laws, debris filled driveways and untended pools. So who takes care of the property after the homeowners move out? It appears as though foreclosed homes become the city’s problem once the property is evacuated. The city must maintain code and adhere to certain laws, which require all homes to maintain a certain level of appearance and safety.
Once a home enters foreclosure, no one is around to take care of maintenance and many lenders avoid the issue. To keep up city regulations, local government is forced to step in and take care of the maintenance costs. These costs are typically added to the tax bill associated with the property, but have even been known to affect property taxes of surrounding neighbors. Not only can a foreclosure cost the city money, but the neighbors and local taxpayers also stand to suffer from increased taxes along with declining property values.