New Technology Platform Aims to Decrease the Number of Abandoned Homes
If you have spent any time in America's urban neighborhoods in the last 20 years, you have witnessed the rising numbers of vacant and abandoned homes and buildings dotting the urban landscape. While cities have struggled to lasso the issue - a Washington Post story published in May 2015 claimed that Baltimore, MD alone had a whopping 15,000 abandoned homes - the associated uptick in crime and blight have pushed frustrated residents to demand local governments fix the issue. However, as Julius L. Cartwright, Past President of the National Association of Real Estate Brokers explains, that is not such an easy task. "First, many cities have an issue where homes are abandoned faster than the local land bank can turn around their current inventory so the vacancy rate must rise - it is simple mathematics. Second, land bank acquisitions are reactions to risk factors like property tax delinquency implemented several years after that risk factor first became known thru public records. As a result, the number of abandoned homes reaches into the thousands or tens of thousands, as is the case in Baltimore and Cleveland." However, times change and a solution may be in the works.
Mr. Cartwright and five other Clevelanders, including a sitting member of a local city council and two retired city commissioners, are hoping to bring a new weapon called the Virtual Land Reutilization Platform, or VLRP, to the fight that promises to ditch the hundred-year-old policies deployed by local governments and tackle the issue using technology that did not exist when city governments created their local building and housing codes decades ago. "The VLRP is built on the Amazon Cloud and utilizes analytics and Artificial Intelligence to store data on distressed properties while looking for predictable patterns and curable title defects within that data set. Think of it like refurbishing a cell phone - the entire phone did not go bad, just the charging port. So we are going to take the phone apart, fix the charging port, and then put the phone back together. In real estate, let's say the house is sitting abandoned because the owner is upside down on their mortgage but the mortgage lien holder has no plans to foreclose, the owner has a judgment lien against the property from an unpaid credit card bill, and the owner is also a ward of the probate court because they have dementia. Under current land bank methods, that house will sit empty for years and years until the county files a tax foreclosure and the property transfers to the county land bank. Under VLRP, if the mortgage is with Citizens Bank, the judgment lien is with a law firm with a reputation for taking reasonable offers, and the family members are willing to work with a probate lawyer that we will provide free of charge, that property can transfer today. The VLRP can detect the statistical probability of each one of those events occurring in less than 3 seconds. It tells us the exact probability that the property can be converted to productive use within a 30-day period", says Kevin Ra, the inventor of the VLRP who, over a 15-year career as a real estate investor, used an early version of the platform to acquire nearly 300 abandoned homes. Ra is the founder and CEO of Parcel Revenue Corporation in Beachwood, OH and is also an Ohio-registered lobbyist. The system is marketed under the brand name Parcel Revenue and, like in the example that Ra provided, it detects what issues are preventing a transfer of an abandoned home and lasers in on that issue.
So exactly how does the VLRP know which title defects can be cured? "I took really goods notes over the last 15 years I guess", says Ra jokingly. In actuality, Ra began creating spreadsheets of abandoned properties and the real estate title information associated with those properties, such as who owns a mortgage or a judgment lien, about 15 years ago. Over the years, he began to notice a pattern which he now describes using the term "Investor Recidivism", or IR. "IR occurs when a house sits abandoned for years and is then purchased by an investor who either has no idea what he's doing, is severely underfunded to complete the renovation project, is ripped off by contractors, or any combination of the three. What you see is the same abandoned homes going thru this cycle over and over again until property values weaken and more people becoming willing to abandon their homes because they are not worth much and they really can't afford to sink money into an aging, worthless property", says Ra. "The VLRP sorts the titles to these properties using algorithms based on years of research and stored data. Most importantly, it can predict these patterns before they occur which tells a city or a local community development corporation to jump on that parcel now before it enters that cycle, not five or six years after the cycle is started and the house has been sitting for so long it is now worthless and dangerous", adds Ra. "The VLRP is currently monitoring about 10,000 parcels across Ohio, so the system updates us every ninety days so we know when the state of a real estate title changes to one that may be more favorable to an immediate transfer - such as an old lien expiring or a mortgage being sold from a lender with a history of being unreasonable to one with a history of being reasonable. That's one of the keys - the platform can accurately score the difference between an underwater mortgage with Citizens Bank, who is almost always reasonable to deal with based on our data, and a mortgage with Ocwen or Bank of America, who are almost always unreasonable based on that same data. Real estate deals on abandoned homes can close when lien holders are reasonable and accept a settlement based on what the property is actually worth instead of vetting offers based on what is owed on the loan. Banks need to cut their loses and realize that ship has sailed. Get what you can get and stop holding these urban neighborhoods hostage with worthless liens.”
Inasmuch as the complex world of Artificial Intelligence and computer-generated algorithms is Greek to clear majority of us, Kimberly Hodge-Edwards, who has served on city council in Warrensville Heights, OH for the past eighteen years and is a board member of the Abandoned Homes Project, a collaboration of local leaders funded by Parcel Revenue which serves as a real-world testing ground for the VLRP, offers a much simpler explanation of how the platform works. "The Project uses the VLRP to predict which currently occupied homes are in danger of becoming abandoned homes and to predict which abandoned homes have curable title issues and can transfer immediately without government intervention", says Edwards. "The name Parcel Revenue made no sense to me until I learned that my city, Warrensville Heights, is losing about $6000 per year per abandoned home in the form of lost income tax revenue from two wage-earners. That's revenue being lost to unproductive parcels and cities literally cannot afford to allow it to continue. To survive fiscally, cities like ours need the revenue generated from those parcels. We need that parcel revenue."
In 2015, the Project began assisting homeowners by issuing vouchers to pay for attorneys, title companies, real estate agents, and other professionals to work with the owners of abandoned homes. In 2019, the Project will issue 400 vouchers and has a waiting list of thousands of vouchers ready to be issued. How is all of this paid for? "Well we own our own title plant in Asia and we own the escrow company that handles the transactions when the properties are resold. We also charge the buyer a fee to purchase a property through the program that enables us to watch the property for several years after the sale to make sure they are maintaining it. If they don't, we will report them to the city immediately. There are literally hundreds of thousands of abandoned homes across the United States, so it is a lucrative market for title and escrow fees that was virtually untapped until now", says Sinera McCoy, who is state-licensed both as a real estate agent and an insurance agent and oversees the Project.
Homeowners who own vacant, abandoned, or tax-delinquent properties, as well as homeowners that have been summoned to housing court to answer for code violations, are encouraged to contact the Project. Assistance is provided free of charge and the Project currently serves the Ohio cities of Cleveland (and surrounding suburbs), Columbus, Akron, Canton, and Painesville.
Cities and local governments interested in implementing the VLRP can contact Parcel Revenue and the Project at 216.766.5705. Cities may also want to check the local coffers before contacting the Project, however, as the cost of implementing the software platform will stretch the budgets of most urban U.S. cities. "The VLRP is very affordable for cities with low vacancy rates who want to get ahead of the problem. However, to implement the VLRP in large urban areas like Baltimore or Cleveland would cost well into the millions of dollars. Watching 10,000 parcels is one thing, watching 800,000 is something totally different. But, it can be easily done. I don't think we will ever reach a point where Amazon cannot hold more of our data, but we'll need to be able to pay them of course", says Ra.
For the original news story, please visit https://www.prdistribution.com/news/new-technology-platform-aims-to-decrease-the-number-of-abandoned-homes/3729035.