Bulldoze: The New Way To Foreclose
Ablang
Time.comBy STEPHEN GANDEL | Time.com � Mon, Aug 1, 2011
http://news.yahoo.com/bulldoze-way-foreclose-102000063.html
Banks have a new remedy to America's ailing housing market: Bulldozers.
There are nearly 1.7 million homes in the U.S. in some state of
foreclosure. Banks already own some of these homes and will soon have
repossessed many more. Many housing economists worry that near constant
stream of home sales from banks could keep housing prices down for years
to come. But what if some of those homes never hit the market.
Increasingly, it appears banks are turning to demolition teams instead
of realtors to rid them of their least valuable repossessed homes. Last
month, Bank of America announced plans to demolish 100 foreclosed homes
in the Cleveland area. The land is then going to be donated back to the
local government authorities. BofA says the recent donations in
Cleveland are part of a larger plan to rid itself of its least saleable
properties, many of which, according to a company spokesperson, are
worth less than $10,000. BofA has already donated 100 homes in Detroit
and 150 in Chicago, and may add as many as nine more cities by the end
of the year.
(LIST: Top 10 Most Affordable Cities for Renters)
And BofA is not alone. A number of banks are ramping up their efforts
not just to rid themselves of their unwanted homes, but to fully dispose
of them. Fannie Mae has a program to sell houses to local municipalities
for around a few hundred dollars. Wells Fargo has donated 800 homes to
be demolished since 2009. JPMorgan Chase says it was one of the first
banks to begin donating houses it couldn't sell, or didn't think were
repairable. Since 2008, the JPMorgan has donated or sold at a discount
1,900 houses to city or county officials.
The banks do the deals because once the properties are donated they no
longer have to pay taxes or for upkeep. Tax experts say the banks may
also be able to get a write off for the donation. That appears to be a
better deal than trying to repair some of these homes, which according
to a BofA spokesperson are more economical to demolish than fix up. The
local governments like these deals because they get free land to develop
or use for open space. Cleveland-based Cuyahoga County Land
Reuntilization Corp., which inked the deal with BofA, has been one of
the most aggressive local government organizations in striking these
deals. Housing economists like these deals because they remove homes
from the market that would otherwise sell for a low price or not at all,
dragging down home prices in general. An oversupply of homes on the
market has been once of the big problems plaguing real estate. At the
end of June, it would take nine and a half months for the current number
of homes on the market to sell. The housing market is considered healthy
when supply equals six months of sales. So taking some of these homes
off the market for good could remove some of the inventory drag.
(MORE: How To Fix the Housing Market)
The question is whether the banks will ever put up enough housing for
demolition to make a difference. The Obama administration says it is
working on its own plan to revamp its loan modification program in order
to help keep more people in foreclosure in their homes, reducing the
number of foreclosed properties on the market. Some areas of the country
are looking at how to speed up foreclosures in an effort to return some
normality to the market. It's not clear that any of this will work.
Certainly, the idea that we are at the point where banks would be better
off knocking down houses that reselling them shows there is still
something very wrong with the housing market. But what is clear is that
banks and others are at the point where they are ready to try something
new to boost the housing market. And that is a good sign for the future.