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Scott Petersen

Soak the Banks

New ordinances are sweeping through local governments that are targeting Bank Owned properties. The city of Livonia Michigan adopted ordinance #2844 on October 8, 2009, the Township of Canton Michigan adopted a similar ordinance #79 on January 12, 2010, while Plymouth Township adopted Ordinance C-2009-08 on June 23, 2009. The reported purpose of these ordinances are to reign in banks maintenance and care of their properties, while in their inventory. Many of these bank owned, vacant and abandoned registration ordinances require the owner to register the property with the city as being vacant and pay a fee for the registration. This fee and registration supposedly reimburses the cities for their increased policing of blight enforcement against these properties. Additionally, several cities are requiring special inspections for vacant properties before they can be reoccupied. Of course, there is an additional fee for this special inspection of up to $500.

In a real sense banks have brought this upon themselves. Neglected bank owned homes with foot high grass, unsecured doors, and green pools were common in the past few years. Local communities fought a relentless fight to determine which bank owned the derelict properties. In addition, banks are flush with bail-out money, while local communities struggle to make payroll. The city of Livonia, Michigan recently enacted their ordinance in late 2009 and has already registered 137 bank owned and vacant properties. By my calculations, this has netted Livonia approximately $60,0000 for the first six months of the program.

While everyone I know does not mind soaking the banks, these ordinances are also potentially hurting every sale and homeowner. Let me explain. To not directly target the banks for these fees and increased scrutiny, many of the ordinances simply target vacant properties. For example the City of Livonia's ordinance include several definitions that would include non-bank owned properties into their ordinance program. Several of the definitions that I believe will affect sellers are: 

·     A Single Tenant building that has been vacant for more than twenty eight (28) days.

·     Has Utilities that have been disconnected or not in use.   

·     Demonstrates a lack of property maintenance as evidenced by one or more violations.

The first issue that homeowners and sellers may have is that one of the definitions of a vacant home is one that has been unoccupied for 28 days and/or has not used utilities. This means that if a seller has to move out of their home 30 days prior to closing for any reason, their home must be registered and the fees paid. So, if a seller is transferred to another city and moves before closing, their home must be registered.

Additionally, I do not see any provision in many of these newly drafted ordinances exempting homeowners that are snowbirds. In Michigan we have a large population that travels to warmer destinations for the long winter months. Most of these homeowners vacate their homes for longer than 28 days. After my reading of the ordinances of many cities, these homeowners would be required to register their homes and pay the fees.

Now this is not just an exercise for me to find the pitfalls of legislation. I have a current deal that has been swept up into this new ordinance. My clients listed and sold their home with a Short Sale with me that we closed on three weeks ago. As with all Short Sales the duration of the sale was very lengthy. From accepted offer to closing was about 120 days. The sellers had to partially move to a new location due to an illness in their family 40 days prior to closing. The sellers kept all utilities on, maintained and visited the home regularly, as well as kept some contents in the property. This was not a neglected or abandoned property.

The first sign of trouble was two days after the new buyer purchased the home, the city placed a bright orange sticker on the door that proclaimed the occupant of this house is occupying the property illegally and could face misdemeanor charges and be evicted. Defiantly not the welcome you are looking for. When I received the frantic call from the Buyers Agent I was very confused as to why the city was threatening the new homeowner, as this city does not have any type of pre-sale inspection or Certificate of Occupancy.

After talking to several city employees, I was told that the home was reported as vacant and would have to comply with the new ordinance. After many of hours on the phone it seems that the bank that was shorting the property registered the property with the city as being vacant. The banks explanation is that only 30% of short sales are being closed, so they register all properties that are in default even if they have not been foreclosed on yet. In addition, the fines for not registering the properties are $500 for each occurrence on to top of the fees, so registering properties before they are foreclosed only protects the banks.

The ordinance department is not relenting on the fee's because they claim, "we are bound to charge these by the ordinance". So in the cities attempt to soak the banks, they are soaking individuals that are buying their first home, or sellers trying to do the right thing and not allow their home to fall into foreclosure. If cities continue to enforce these ordinances against properties that are not abandoned or neglected, I believe that we will see more sellers simply allow their homes to foreclose, and we will see a second wave of bank owned homes. This will cause a further erosion of home values and not just soak all of us, but may drown us in the process.  

Scott A. Petersen


Remerica Country Place


(734) 776-8355 cell

(734) 981-2900 office

(734) 736-1114 fax


44205 Ford Rd.

Canton, MI 48187

Published Saturday, April 10, 2010 12:02 AM by Scott Petersen

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