Residential property: a building used or suitable for use as a dwelling.
Residential property: A type of property, containing either a single family or multifamily structure, that can only be used for non-business purposes.
Residential Property: Before and After Foreclosure
Residential property is any property that a municipality has designated for single family homes, apartments, co-ops, condominiums, townhouses, and any other dwellings. Mortgages on and income from residential property often receive special tax treatment.
In real estate brokerage, residential property means an owner-occupied residence, although a rented home is also residential property. For tax purposes, residential property is any rental property in which at least 80 percent of the income is from residence units. Residential property has a 27.5-year depreciation period, while commercial property must be depreciated over 39 years.
Tax rates on residential property are set by local governments.
In Nashville, for example, “The Metropolitan Council sets the property tax rate. The 2017 tax rate for Urban Services District is $3.155, and the rate for General Services District is $2.755. Residential property tax is based on the assessed value, which is 25% of the appraised value, and commercial property tax is also based on the assessed value, which is 40% of the total appraised value. Collection of property tax comprises 46% of the entire Metropolitan Government operating budget.”
Residential property taxes usually fund local initiatives.
In Illinois, for example, “property taxes are the main source of income for local governmental entities (schools, municipalities, fire districts, library districts, etc.), which means the overall tax burden falls more heavily on residential property owners. Some types of governmental units, such as cities, are less dependent on property taxes than other units, such as school districts, which have no other taxing powers.”
If a homeowner abandons a residential property after foreclosure and the bank is unable to sell the home, the new owner, in this case the bank, will be responsible for the upkeep of the home in an effort to avoid zombie properties.
A new law signed by Gov. Andrew Cuomo in obligates banks, other lenders and mortgage holders to maintain abandoned residential property facing foreclosure and fast-tracks the process to get those properties back on the market.
A registry database of vacant residential property, which is maintained by the State Department of Financial Services, allows local governments to find out who is responsible for the maintenance of a residential property in foreclosure.
Though foreclosures have decreased nationally to a 12-year pre-recession low, many regions are still experiencing above average foreclosure activity.
And even though foreclosure rates have waned overall, there are still 1.4 percent vacant residential properties around the country that have either been abandoned by homeowners during foreclosure, or are bank-owned, especially in Mississippi, Michigan, Indiana, Oklahoma and Alabama.
In an effort to keep up with abandoned residential properties, New York passed the Vacant and Abandoned Property Law.
“Effective December 20, 2016, Sections 1308 and 1310 of the New York Real Property Action and Proceedings Law (RPAPL), obligates mortgagees and servicers to assume certain responsibilities in connection with vacant and abandoned residential properties securing mortgage loans in their portfolios. Among these responsibilities are the duty to inspect properties securing delinquent loans and to register properties that meet the statutory definition of vacant and abandoned with the Department of Financial Services,” says the department.
As a result of the law, PHH Mortgage, a mortgage servicer, was fined by the New York Department of Financial Services for failure to maintain a zombie residential property.
“The announcement of this enforcement action puts banks and mortgage servicers on notice that if they do not maintain vacant and abandoned properties, they will be held accountable by DFS,” said Superintendent Maria Vullo.
“It is also crucial that banks and mortgage servicers provide DFS correct and timely information and updates on vacant and abandoned properties to ensure full compliance with the law and correction of violations. Anything less will be met with swift enforcement action.”