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From Bust to Broom: Foreclosure cleanups bustling

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[November 28, 2008]  FORT EDWARD, N.Y. (AP) -- Several men wordlessly carry out furniture, broken computers and boxes of garbage from a large blue house on a quiet upstate street on a brisk autumn morning. Rusting bikes and an old grill lay discarded in the overgrown backyard which is spotted with empty beer cans and crushed milk cartons. The mood is oddly serene as the men unload the remnants of what was one someone's home.

Todd Drake, manager of Empire Real Estate Management in Latham, is overseeing yet another eviction. The home's former owner has long gone, leaving just debris and an old phone number in his stead. After a county sheriff's deputy checks to make sure no one is inside, crews head in to change the locks and clean out the refuse - also known as a "trashout." Drake is stoic as he watches his crew.

"These evictions are the last resort," he explained. "I'm not here to judge that - the circumstances or the lifestyle."

The nation's housing bust and economic downfalls have greatly increased the number of homes being foreclosed and taken by banks. The bank typically hires a real estate agent to resell it, but someone has to come in and clean up after the last residents. That's led to a boom in a new type of startup business - cleaning up foreclosures, also known as "real-estate owned" or REOs.

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Web sites aimed at wannabe entrepreneurs - like http://www.explorestartups.com - frequently suggest starting up a foreclosure cleanup business as moneymaker. Entrepreneur Magazine even picked a foreclosure cleanup business called Cyprexx for its 2008 "Hot 100 Fastest Growing Businesses" list.

Real estate firms have also taken on this side of the business, handling eviction lockout and property management services such as repairs and cleaning out the houses. Sometimes the firms contract another service to do the messy work, but others, like Drake's firm, do it all.

"It's just becoming a way of life. It's sad. we try not to have too many opinions out on the field to be honest," said Linda Hall of All REO Preservation in Riverside, Calif. "You kind of have to (stay detached from it), you can't think about the circumstances of it."

On the street where's Drake's crew was cleaning up, neighbors said they weren't too worried about whether the foreclosure would hurt their home values.

"I think they just got into trouble financially," said William Trackey, who lives across the street. He said there was a man, his girlfriend and a couple of children living there.

"It's a nice neighborhood and I've lived here for a long time," said Trackey, who says foreclosed homes are a rarity in this neighborhood of primarily owner-occupied homes. "You don't often even see many homes for sale on the street."

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According to the Mortgage Bankers Association, over 4 million homeowners were at least one month behind on their loans at the end of June according to the latest statistics, and almost 500,000 had started the foreclosure process. An estimated 2.8 million U.S. households will face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage's value by the end of next year, predicts Moody's Economy.com.

When a deal can't be negotiated, an eviction may have to be obtained from the courts. In those cases, the county sheriff delivers the eviction lockout notice and peaceably reviews the situation.

It's not as common for the occupant to stay full-term after the foreclosure, but it does happen, Drake said. In one case, his crew found the resident still inside, armed and refusing to leave. Fortunately, he said, police were able to safely resolve that situation. Companies like Drake's usually try to the "cash-for-keys strategy" first, in which a homeowner facing foreclosure is offered a small sum, usually between $1,000 and $3,000, in exchange for a clean, quick departure and handing over the keys.

Hall was working in the bookkeeping business in 2007 when a client got her then-boyfriend involved with foreclosure cleanup. In February, she launched her own business, All REO Preservation.

"We've been butt-kicking busy," said Hall. "I work in the field as much as I work in the office."

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So busy that Hall's even working on putting together a nationwide plan to give work to other contractors, and currently has crews and subcontractors in several other states. Her business also offers its own training program for startups.

"Some of the homes are in pretty good shape and it's just a matter of changing the locks, cutting the grass, etc.," said Hall. "If it's a big, heavy trashout, those homes have either never been maintained or people are angry when they move out and do a little damage."

As foreclosure rates have risen, so too have the number of trashouts. While people typically take their valuables when the move out, sometimes they'll leave things behind like photographs and kids' pictures, and even family pets. Hall said she recently found two dogs that had been left behind when their owners left, a boxer and a pit bull puppy.

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Many occupants even take the copper piping out of the house when they leave, while other people actually scout out the vacated homes to steal the copper piping. The troubled economy has led to rise in copper and scrap metal theft - prices for which have increased in the past few years.

While there are no statistics tracking copper thefts from vacated homes, real estate agents, contractors and police departments around the country are reporting a significant rise in these thefts; police in some counties report a 100 percent increase in the number of copper thefts from 2007. That causes more headaches for those who have to clean, repair and sell the houses.

"There's a real correlation between the state of the economy, the foreclosure rate and copper being pulled from homes," said Boston-area real estate broker Marc Charney. "We're seeing somewhere in the neighborhood of 50-60 percent of the houses we have (getting stripped), some during the acquiring process."

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"We put (the house) on the market, we might even find a buyer for it, and then somewhere between them buying it and us needing to close, people will break in and steal all the copper," said Charney. "If the lender for the new buyer finds out, that's a problem. It messes up the whole process."

As for the stuff that's left behind, most counties require all personal property to be put in storage for 30 days to give the previous owner a chance to reclaim it. Most of the time, they don't.

"Every house and situation is different," said Hall. "Every circumstance for people losing their house is different too. Sometimes you see medical equipment left behind and you sometimes can assume they lost someone and just couldn't keep up with the medical bills."

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On the Net:

Mortgage Bankers Association: http://www.mbaa.org/default.htm

Empire Real Estate Management: http://www.empirerealestatemgt.com/

[Associated Press; By JESSICA M. PASKO]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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