There are many ways for a lending institution to handle a foreclosure, and there are apparently many ways to deal with the foreclosed property after they have it in their possession. There are close to 1.7 million houses in the U.S. in some stage of foreclosure. Banks already own a large number of these houses and will soon repossess many more. Housing economists worry that a near constant stream of home sales by banks could keep housing prices down for years to come. But what if some of those homes virtually “disappeared” and weren’t sold?
Increasingly and perhaps surprisingly, evidence is surfacing that banks are turning to demolition teams instead of realtors to get rid of their less marketable, repossessed houses. According to a report I read in Time Magazine, Bank of America last month announced plans to demolish 100 foreclosed homes in the Cleveland area (an area where house prices are quite depressed). The article claimed that land that the demolished houses stood on will then be donated to local government authorities. Spokespersons for Bank of America say the donations in Cleveland are part of a larger plan to rid itself of its properties with the least marketable value. Many of these soon-to-be demolished houses, according to a company spokesperson, are worth less than $10,000. The bank 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.
This situation may exist in your city. The not-so-obvious opportunity in these circumstances may be whether the banks would be willing to offer these houses for next to nothing to entrepreneurs who would either fix them or move them to areas where the foreclosures could be converted into rental housing. A number of banks are making plans to not just rid themselves of their unwanted inventory of foreclosed and repossessed houses but also fully dispose of them.
Fannie Mae has a program to sell houses to local municipalities for a few hundred dollars. You can learn more about this and Fannie Mae’s rental programs by going to their web site at http://www.fanniemae.com/kb/index?page=home.
Wells Fargo has donated 800 homes since 2009. While some of those homes have been demolished, a spokesperson for the bank says many of the homes have been given to not-for-profits with plans to renovate the homes, not tear them down.
JPMorgan Chase says it was one of the first banks to donate houses it couldn’t sell or weren’t worth repairing. Since 2008, they donated or sold at a discount 1,900 houses to city or county officials. They also have more information available at their web site at https://www.chase.com/.
The hidden potential for these unwanted and undervalued houses are just now becoming obvious to investors and property managers who know how to parlay them into affordable rental housing. It’s definitely worth exploring.