Foreclosures and Residential Real Estate and Banking & Finance and Mortgages and Real Estate & Retail

Bill to target abandoned-home epidemic in Indiana

December 23, 2013

An Indiana lawmaker plans to file legislation next month to address an abandoned housing blight plaguing the state.

Sen. Jim Merritt, R-Indianapolis, wants to shorten the amount of time homes sit idle, as well as reduce the incentive investors get when they pay off tax liens on abandoned homes with little intention of actually purchasing the property. 

“This is a very complex issue. The bottom line is we want these homes being vacant for as short a time as possible,” Merritt said.

Most states, including Indiana, let speculative investors pay off delinquent tax bills on abandoned homes when they are offered at public auction. If the former occupant later decides to pay off the tax bill and keep claim on the property, that person is charged a penalty that goes to the investor. The penalty in Indiana is typically 10 percent of the tax bill amount.

Merritt said he’d like to reduce that return to investors, perhaps to 5 percent. That could discourage vacant-home investors whose only intention is to work the tax system, rather than to see a home improved and re-occupied.

“I want to see people have in interest in the home itself, not as a bank account or investment,” he said.

Another measure Merritt is contemplating would reduce the period during which a previous owner of a foreclosed home could make an offer to repurchase it. Currently, that period is one year, following a sheriff's sale.

Shortening that period to six months could reduce the amount of time a house is unoccupied. Merritt said it doesn’t happen often that a person who lost a home in foreclosure wants to buy it back, but there are occasions when that person’s financial situation improves shortly thereafter.

The proposed measures could receive serious attention during the short session of the Indiana General Assembly early next year. Merritt said the issue of abandoned homes is one that both sides of the aisle agree needs to be dealt with.

Merritt has been working on the issue since the 1980s.

Indiana Bankers Association head Joe DeHaven traced the origins of the glut of foreclosured and abandoned homes to the mid-1990s, when the state’s manufacturing sector began downsizing.

The problem intensified during the Great Recession. This year, the Indianapolis-Carmel area ranked No. 1 in the nation for the percentage of homes in the foreclosure process that had been abandoned, according to 24/7 Wall Street, using data from analytics firm RealtyTrac.

That amounted to 2,488 vacated homes, or one-in-three foreclosed homes in the metro area. Statewide, about 30 percent of the 16,618 foreclosed homes have been abandoned—or about 5,000 homes.

“These homes are poisonous to a neighborhood,” Merritt said. 

Some homes can’t be saved. Indiana officials are planning to ask the Treasury Department for permission to carve out some of the $222 million in federal funds earmarked for struggling Indiana homeowners to instead demolish houses that have deteriorated beyond repair.

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