Abandonment Issues

As an example that there are still exceptions to the rule of recent market trends, my wife and I have successfully sold our home… by choice. While certainly lower than what we could have sold it for a few years ago, we got a price we could be happy with, and the closing date is scheduled for late May.

So we’ve been house shopping, hoping to benefit from current market conditions; many of the homes we’ve considered have gone through foreclosure. Everyone knows that process is terribly hard on a family… but we’ve also seen evidence of how hard foreclosure can be on a house.

One of the properties we looked at could conceivably be a $400,000 property near the Mississippi River. But it was originally listed at just $199,000… as the main water supply to the house had been vandalized and the basement flooded. The central air, water heater, air handling system and even the kitchen cupboards had been ripped out (and probably sold). With no bolts holding the restroom fixtures to the floor, we wondered whether this home had been the victim of a new urban legend: That former occupants dumped concrete down the sewer pipes on their way out, as an act of vengeance on their mortgage holder or the next owner. Recently, we noted that the house had fallen another $20,000 in price.

But houses are not the only properties suffering from abandonment issues. With increasing frequency, automobiles are being torched by owners who are upside down in debt. (See the CBS News video below. Commercial pre-roll required.)

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And as if to dramatize that the problem has gone beyond coast to coast, a story in today’s New York Times indicates that some folks have “abandoned ship,” dumping a boat they can no longer afford… leaving watercraft to litter the nation’s coastlines.

Implications: Professionally speaking, my first thoughts on this issue have to do with the how we will define “qualified buyer” in the future. I have to believe that companies who sell big-ticket items—of any kind—will be forced to change the way they decide whom to lend to. This new age of default has changed the game. Now, having a buyer or borrower who cannot pay for an item is the least of your worries. A company who sells or finances a major purchase must now worry about whether the customer will actually destroy the items sold... which often represents self-securing collateral for the transaction.

To continue the professional perspective, I’d watch for an explosion of recovery-based small businesses: Developers who move from building houses… to re-building them. Salvage specialists that can make abandoned watercraft sea-worthy once more. Will credit counseling firms go beyond payment renegotiation and financial coaching… to warning clients of the risk of criminal destruction of property?

The challenges and opportunities presented by this default-and-destroy mentality will not fall exclusively to private enterprise. Non-profits and public service organizations will also inevitably be involved. I’ll offer some personal thoughts with the goal of explaining what I mean. What is the environmental impact of coastlines and waterways littered with boats and yachts that have been strips of their sale-able parts? When so many charities have embraced the “donate your car” approach to raising revenue, isn’t it a tragedy to see so many vehicles going up in smoke? And wouldn’t it be great if a share of these abandoned homes could be leveraged to the advantage of people and families who don’t have one?

Mike Anderson