BLOG VIEW: Squatters? Who in the mortgage business even deals with this problem?
The problem of squatters occupying vacant, real estate owned (REO) properties has been growing steadily since 2009. A squatter, according to Wikipedia, is someone who occupies an abandoned or unoccupied area that they do not own, rent or otherwise have a lawful permission to use. There are an estimated 1 billion squatters worldwide; however, a majority of them are overseas.
American cities that were plagued by the housing crash are now having a real problem with this issue. After the market crashed, private investigators were mostly being used to secure video of ex-homeowners moving out, in hopes that if caught purposely damaging the property, a bank could recoup costs for the vandalism.
Then banks and property managers started noticing damage on homes that they knew were in good shape only a week or month prior.
Today, private investigations companies like ours are being deployed on a near-daily basis to check on properties to ensure no one is living in them. Most are using a mix of video and on-the-scene surveillance to not only monitor if squatters are present, but also to check for damage. Firms such as ours send weekly reports to banks and property managers, updating them on the condition and occupancy status of their properties.
Some American cities have so many abandoned houses that it would be nearly impossible to check on all of them every day; however, with the use of a trained eye of a private investigator, the task can be accomplished much faster. Very often a trained investigator can tell if something has changed with a particular property by doing a simple ‘drive-by.’ These services are relatively inexpensive when purchased in bulk.
Of course, home security systems can be installed, which, in turn, allows property managers to monitor the homes from virtually anywhere in the world via a Web-connected device. However, this can be more expensive when compared to short-term surveillance of an REO property provided by an investigative firm until it is sold. By closely monitoring properties that are deemed ‘high risk’ for squatting, servicers, lenders and property managers can greatly reduce the risk of having to deal with squatters.
The costs and liability risk of squatters can be very high – particularly in terms of legal fees. Evictions and civil suits can be expensive – and should a lender decide to sue a squatter, the chances of recovery are very slim (that is, if it can even find out the squatter's name). If a squatter has a utility bill in his or her legal name, an investigator can oftentimes obtain that information.
So what legal approach do we use when we discover a squatter on a vacant property? I strongly feel that sending someone to legally enter the residence and secure photos should always be the first step. The second step is to contact the local police and have trespassing charges filed – however, it should be noted that in some jurisdictions, the squatters may have established ‘residency,’ and if so, this method isn't viable. You must then file with a local court an eviction, have it served, and after the given period, send in a cleaning crew to remove the waste and property left behind.
I have also heard of cases where a squatter sued a property owner for illegal eviction and removal of property – their contention was they had permission by some unknown person to be on the property, so the intent of squatting didn't apply. As their property was discarded, they sued and recovered their costs, because they believed they were allowed on the property and allegedly paid rent to a person who represented themselves as the property manager.
It's been suggested that should a property manager need to remove a squatter's belongings, they should tag and document each item and place it in storage. Then, as the squatter attempts to recover their property, they will be liable to a removal-and-storage fee. This, in turn, can help alleviate some the financial burden on the lender/servicer.
No doubt, squatting is a growing problem. Property managers and banks are already on the hook for millions of dollars in foreclosed and abandoned homes but now have the costs of protecting that property so that it can eventually be resold.
I feel that another good way lenders can combat the problem is to offer more rent-to-own programs. With fewer people qualifying for mortgages today, it is in a lender's interest to keep an original owner in their home and have them pay rent. Should that renter be able to restore their credit, it is entirely possible that they might once again qualify for a mortgage – which makes a win-win situation for all involved. Now,the property is secured, it's being paid for, and the chances of it being vacated and then inhabited by squatters has been substantially reduced.
Michael P. Andrews is owner of AG Investigations LLC, a national private investigations firm headquartered in Syracuse, N.Y. To find out more about the firm's anti-squatting program, contact Andrews at email@example.com.
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