In the news lately is a trend dubbed “Buyers’ Revenge.”  The gist of the issue, according to most media reports, is that homeowners in foreclosure are removing appliances, fixtures and other amenities from their homes before turning possession over to the banks, reportedly as revenge against their lender.  In extreme cases homeowners are “trashing” the properties. In some cases – short of the home trashing – we would suggest this isn’t revenge but, rather, making the most of a bad situation.

Many, particularly lenders, suggest that such action is not legal but there is little they can do to stop it as the number of foreclosures simply is overwhelming and they cannot police or prosecute such action.  According to a recent Wall Street Journal article on the topic, “The most practical way to ensure the houses are returned in decent shape, lenders and their agents say, is to pay homeowners hundreds or even thousands of dollars to put their anger in escrow and leave quietly.”  The article goes on to cite an instance where a bank offered a homeowner a mere $500, later upping it to $2,800, to leave the home “soon, in tact and broom swept.”

While, again, we would not condone trashing a property we would argue that depending on how the original mortgage was written removing amenities from a home in foreclosure is a legitimate action, particularly if the homeowner has made upgrades to the property that exceed the value of the mortgage balance.

Consider this:

• If a homeowner purchased a property at $150,000 with $10,000 down and a $140,000 mortgage, but has a $90,000 mortgage balance at the time of foreclosure, does the homeowner “owe” the bank any more than that $90,000 balance? 
• If the current market value of the home is $200,000, would it be wrong to remove a sink, a washer & dryer or a refrigerator – particularly if the homeowner purchased and upgraded these items during residency — that may be salvaged for use in other living quarters or sold to help pay for alternative housing so long as the as-is home value remains at least as much as the mortgage? 
• Alternatively, should these bank offers be in the tens of thousands of dollars – the difference between the home’s market value and the mortgage balance, less the estimated cost of marketing and selling the home – rather than a few hundred or a few thousand these lenders offer homeowners who leave items in tact?

The answer to some questions will vary by individual case.  It is important to consider is how the original mortgage was written.  Were appliances and fixtures included in the home’s value?  If so, were they itemized regarding their value?  Depending on the contract language it may be both justifiable and legal to remove certain amenities prior to foreclosure so long as the removal does not cause damage to the structure or otherwise cause its value to fall below the mortgage balance.  And in the end, the value of those amenities likely will surpass any “soon, in tact and broom swept” offer a lender may make.

Our firm has handled more than $50 million in foreclosed properties and is batting 1,000.  In each case, our client was extracted from the mortgage contract with no personal deficiency (i.e., the balance of mortgage was forgiven by the lender).  If you are facing foreclosure contact Joseph P. McCaffery & Associates to determine your rights and options and, if you must leave your property, whether that new washer-dryer set can go with you.