Kuwaiti real estate broker AbdulAziz HouHou is currently in prison for a scam worth $140 million to $240 million, in which HouHou and his company allegedly defrauded thousands of investors.
HouHou sold houses to investors promising 15% returns, with a management company taking care of everything from tenant leasing to repairs and rent collection. However, The Buffalo News [1]reports that many of the houses sold were rundown and dilapidated, and HouHou often sold homes to two different investors at the same time, or sold houses that were not even for sale.
HouHou’s companies flipped around 160 houses in the Buffalo, New York, area, a quarter of which faced housing court judgement, and half of which entered foreclosure. Buffalo News found that half of the 40 houses HouHou sold in Buffalo on a single day in December 2015 were vacant at the time of sale, according to a Buffalo housing inspections report. Sixteen houses were so dilapidated that the city had them demolished, while nine caught fire and many were vacant and stripped of piping.
"Vacancies in neighborhoods create many problems. Neighbors have been concerned, and have been complaining," said Louis J. Petrucci, Assistant Director of Buffalo's Department of Permits and Inspections Service.
All of this led to increased urban blight in areas where HouHou and his company operated, including Buffalo, as well as Detroit, Cleveland, Florida, and North Carolina.
A white paper published by the National Mortgage Servicing Association [2] (NMSA) discussed some “common sense, practical, and affordable remedies,” aimed at reducing the costs of foreclosure practices and community blight. According to the white paper [3], titled “Understanding the True Costs of Abandoned Properties: How Maintenance Can Make a Difference,” the typical foreclosed home can impose costs of around $170,000, $85,000 of which is attributable to vacant property requirements and condition.
“It’s time to rethink how we deal with vacant and abandoned properties,” the white paper states. You can read the full white paper here. [4]