Why do homeowners leave houses and storefronts empty? -Chicago Tribune | Trending Viral hub


Q: I’m curious. There are several abandoned houses in my area. They are/were beautiful, but year after year they remain empty. Similarly, there are several empty stores in my area, all with competitive and substantially high rates.

Why leave these spaces empty? Why not reduce rental rates, rather than letting these properties sit empty, year after year? Why not sell the houses for one dollar? Are the owners getting a kickback from the government because these properties are losing them money? I can understand that, in the case of homes, there may be many reasons (such as inheritance, etc.), but shop windows?

A: Let’s start with the houses in your area that you say are abandoned. In many cases, and in some neighborhoods, the houses may be truly abandoned. We saw this 15 years ago, during the Great Recession, in cities like Detroit, where blocks of houses were abandoned by their owners and the city eventually tore them down.

In some situations, these houses are not actually abandoned. The owners have died and the closest relatives, perhaps, did not even know that their relatives owned the houses. In other cases, the owners may be non-residents or undocumented. They may have bought the houses, but they may have died without heirs or left the country. And in some cases, owners simply don’t want to sell these homes and believe that holding onto them may give them greater value in the future. Even if they remain empty for years.

A large part of the answer lies in the property taxes on these homes. Are the owners up to date? Otherwise, these houses could eventually be sold to investors. But that process can take several years to complete. Meanwhile, homes and neighborhoods deteriorate, as do property values.

So there are many reasons why houses may be abandoned or appear abandoned. It is also possible that some houses look abandoned, but there are still people living in them. Older people may live in a house, rarely leave it, and never take care of the outside. So, they seem abandoned.

We have seen a house that seems abandoned, except for a light that turns on from time to time. The house has not had any exterior work done in more than 20 years. The paint is peeling. The brick needs repairs. The roof looks like it should be replaced. We have never seen anyone leave the property. A car in the driveway hasn’t been moved in years. It has a flat tire.

In some communities, local government agencies work with owners to sell those properties and put them in the hands of new buyers who want to renovate and live in them. But it is not always easy to facilitate that transition. It takes time to find the rightful owners, get the paperwork in order, and find a buyer willing to do the work.

On the other hand, commercial real estate is a completely different matter. Business decisions generally determine whether a property remains vacant or not. For example, if a tenant decides to move out of a space but continues to pay rent, the landlord will not occupy the space with another tenant as long as the existing tenant continues to pay rent.

Sometimes landlords have several properties available for rent in an area and fear that reducing the rent on one property will force them to reduce the rent on all of their properties when it comes time to renew their leases. Commercial properties are valued based, in large part, on the income they generate. Lower rent levels can have a huge negative impact on the values ​​of your properties. It can make it very difficult for the homeowner to refinance or sell.

In fact, lower valuations could trigger default provisions in homeowners’ loan documents. Loan documents frequently contain provisions that tie the performance of the buildings to the lender’s agreement to continue lending money on the property. Therefore, landlords may prefer to keep a retail store empty than admit to a lender that the value of their property has decreased.

Additionally, commercial leases tend to be longer term. Sometimes these leases last from five to 20 years. The landlord doesn’t want to accept a lower rent today that will reduce the value of their income stream for all those years. They may prefer to wait for the right tenant than accept a bad deal for 20 years.

Finally, there is basic supply and demand. Sometimes there are simply too many stores available and too few retailers who want those spaces. Even lowering the rent won’t fix that situation, as local economic forces make it very difficult to find tenants.

(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (Fourth Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a real Chicago-based real estate attorney. Contact Ilyce and Sam through their website, ThinkGlink.com).

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