Bankruptcy

Property Damage to Foreclosed Property

By Amy Loftsgordon, Attorney

Some homeowners continue to maintain their property during a foreclosure, but not all. In fact, it’s not unheard of for a disgruntled owner to break windows, pour concrete into toilets or paint on the floors, smash the thermostat, or purposely leave the water running. However, punching a hole in the wall or removing the bathroom fixtures comes with consequences. You might lose a “cash for keys” offer, pay more for a deficiency balance after the sale, or even worse, find yourself facing criminal charges.

Rights and Responsibilities During Foreclosure

You have the right to continue living in your house until the foreclosure sale takes place. Even so, your ownership status doesn’t allow you to purposefully damage the property. You’re still responsible for maintaining the home in good condition because when you signed your mortgage documents, you likely agreed to protect the lender’s security interest—the house—and not to impair the lender’s ability to sell it at its full value. Damaging the home would breach (break) the promise not to devalue the home.

Intentional Damage and Foreclosure Stripping

Homeowners intentionally devalue the home by either destroying the house or removing “fixtures”—items permanently affixed to the structure or land—that must remain in the home under the law (a practice known as foreclosure stripping). Fixtures include the oven and built-in microwave, countertops, kitchen cabinets, light fixtures, ceiling fans, plumbing, in-ground landscaping (bushes, trees), and the like. While a homeowner has every legal right to remove personal property (clothing, furniture, televisions, gardening tools), the foreclosed property includes both the house and all of the fixtures, as well. To figure out if something is a fixture, you can ask yourself whether removing the item would cause physical damage to the home. If it would, the item is probably a fixture.

Devaluing Foreclosure Property: Consequences

Damaging a foreclosure property or stripping it of its fixtures comes at a price. Here are examples of the consequences you can expect to face.

You Might Lose a “Cash for Keys” Opportunity

Many lenders will offer a homeowner money to leave the property voluntarily (commonly known as a “cash for keys” deal). The cash for keys amount usually ranges from a few hundred dollars to a few thousand dollars. Keep in mind that the bank might raise the offer if you hold out for a higher amount. Once you take the deal, the lender will give you a deadline to move out. You must leave the home in a “broom swept” condition, which means that you must remove all of your personal property, not cause any damage or remove any fixtures, and tidy up the place. You can expect the lender to require an inspection before giving you the money.

You Might Be Responsible for a Deficiency Amount

When a house sells for less than the amount owed at a foreclosure sale, the remaining balance is called a deficiency. In some states, the lender is entitled to a deficiency judgment which allows the bank to collect the unpaid balance from the borrower by taking money out of the borrower’s paycheck each month (wage garnishment) and draining the funds from a bank account (bank levy). As a result, if you live in a state that allows for deficiency recoveries, and you lower the value of a house by damaging it, or stripping out the fixtures, you might end up paying for it by way of a large deficiency judgment.

You Might Face Criminal Charges

Your actions could have criminal repercussions, as well. For instance, if you set the home on fire, you stand to be arrested for arson and charged with a felony. If you steal the fixtures, you might be accused of theft. Although many lenders won’t bother pursuing a criminal action, by some accounts, it’s happening more frequently—and, the district attorney can always bring charges without the urging of the lender.

Other Potential Consequences

Finally, the lender might sue an offending homeowner to recover the cost of the repairs. The bank could proceed under a clause in most mortgage contracts, which prohibits the owner from destroying or damaging the secured property. However, because the foreclosed property owner often doesn’t have money, suing is rarely worth the effort.

To find out about other actions your lender might take, see Being Chased for Walking Away from Your Home.

Hiring a Foreclosure Lawyer

Foreclosure law is complicated, and the facts surrounding each case are unique. If you need advice about which items are considered fixtures and must remain with the property, as well as the possible consequences of being accused of foreclosure stripping or damaging the home, it’s advisable to contact an attorney. Learn more about when to seek counsel by reading When Should I Hire a Foreclosure Attorney?

Questions for Your Attorney

  • Can you help me negotiate a cash for keys settlement?
  • What should I do if the lender wrongfully accuses me of damaging the property?
  • If I replaced an appliance, do I have the right to take it?

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