2011 Law Stopped Illegal Foreclosures, But Creates New Problems

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A law passed by the 2011 legislature did its job putting a halt to illegal foreclosures, but it's had some unintended consequences.

There should be little surprise about one effect that AB 284 has had.

By putting the brakes on all those foreclosures with faulty paperwork, it slowed the process to a trickle. Back in the worst days of the mortgage meltdown there might be as many as 600 foreclosures a month locally. Today there are a handful.

It certainly saved some people's homes.

"I think it was a good idea and it was well meant," says Ken Amundson of Transaction 500,

But Amundson, a past president of the Reno-Sparks Realtors Association adds, "It probably went a little further than intended."

Alexandra Musser of Chase International Realty agrees. "I think we have a tendency in our industry to bring the bicycle up over the handle bars if you will when we decide to put the brakes on something."

With foreclosures stalled, many chose another route. There was a sudden spike in short sales, but they're more complicated and don't move as fast as foreclosure sales.

The end result is almost counter intuitive. Although local neighborhoods are dotted with unoccupied homes, there's not enough ready for sale to satisfy demand.
"The number of homes for sale right now is less than 500 at any price in the Reno area," says Amundson. "That's in contrast to over 3,000 in 2008."

That's created something of an artificial bubble as homeowners bid against each other for a shrunken inventory while many other homes sit vacant and unavailable.

Musser says the problems don't stop there. "If you are on a street that has four or five vacant properties and the grass is not green and it's being vandalized and no one's living in it, it takes down the value of everyone's neighborhood."

Both note that the problems have been noted and conversations in Carson City are underway to adjust the law streamlining the foreclosure process.