Bulldoze: The New Way to Foreclose

[bluesbassman]

Source: Time


Banks have a new remedy for 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 repossess many more. Many 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 never hit the market?


Increasingly, it appears that banks are turning to demolition teams instead of realtors to rid themselves of their least-valuable repossessed homes. Last month, Bank of America announced plans to demolish 100 foreclosed homes in the Cleveland area. The land will then be donated to local government authorities. BofA says the donations in Cleveland are part of a larger plan to rid itself of its least-salable 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.


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 donations. That appears to be a better strategy than trying to repair some of the homes, which according to a BofA spokesperson are more economical to demolish than fix up. Local governments like these deals because they get free land to develop or use for open space. Cleveland-based Cuyahoga County Land Reutilization Corp., which inked a contract with BofA, has been one of the most aggressive local-government organizations in striking these deals. And 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 one of the big problems plaguing real estate. According to the most recent data, it would take 9½ months for the current number of homes on the market to sell. The housing market is generally 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.






Read more: http://curiouscapitalist.blogs.time.com/2011/08/01/bulldoze-the-new-way-to-foreclose/

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Interesting strategy and could actually be good for a lot of areas where the property values are super depressed and the properties themselves are not servicable.

[hedgehog]

1. It bothers me that Americans treat houses as disposable items.

My great grandmother's house was very study, with a broad cut stone porch and gorgeous woodwork inside. It needed updating, to be sure. There were fixtures that were combination gas lights/electrical.

I hadn't seen the place since about 1972. I was in town last Spring, and drove by.

There was nothing there but a grassy field.


We not only toss away houses, but entire cities.

[bluesbassman]

3. Good point, but in this market some of these houses are just not worth saving.

With the cost of upkeep, taxes and rehab many of these houses are just going to sit as there are no willing or qualified buyers. Letting them sit or selling at extremely depressed prices just further erodes the value of surrounding properties.

Just turning them over to local governments won't help as they're cash strapped and cannot afford the cost to make them habitable and again the transfer value would continue to depress all values.

I'm not saying I like this scenario, but I think in the long run it will be beneficial.

[kentauros]

5. Americans treat EVERYTHING as disposable.

I've found that getting people to donate things they don't want anymore is as difficult as getting them to recycle. If they can't make any money off of it, they don't want to do it. And yet, if the houses were taken apart and the materials re-used (versus bulldozed and sent to the dump) at least some of the house could make some money being re-purposed.

[jmowreader]

19. Recovering reusable materials is very commonly done

A lot of a house can't be reused, but there are parts--like the windows and plumbing fixtures--that can. A demolition company will remove the reusable parts and sell them before they bring in the bulldozer, because that's where the profit in teardown comes from.

[kentauros]

20. To me, it doesn't matter really if it's "profitable" or not.

I'm thinking more in terms of keeping as much as possible out of the dumps. There's still plenty of lumber that can be removed from a house, even if it's no longer in lengths that could build another house. They can be used elsewhere for other projects. Oh, and sheetrock can be recycled, too, from what I've read.

I just find most demolition of houses an extreme waste of potential resources.

[jmowreader]

24. I take it you're not in the building materials industry

Sheetrock is very recyclable--you knock the gypsum off the paper, grind the rock up and throw it back in the pot. You could also recycle wood into things like particle board and that "asphalt impregnated sheathing" crap you put under siding. The problem is, if it's cheaper to make drywall from virgin gypsum than recycled, it will be made from virgin gypsum. "It's two bucks a sheet cheaper!" means a lot to a guy who's hanging 10,000 sheets a month.

[Warpy]

2. It will have to be done for housing that has been vandalized

by looters who strip out copper wires and pipes. Those guys never turn the water off, so by the time the damage is discovered, the place has been awash for hours, days, sometimes weeks and is no longer structurally sound and habitable, certainly not salable.

[Frisbee]

7. Most demolition companies will go through...

with a fine tooth comb, as scrap sales are a significant part of their income.

[Taverner]

4. So you're saying anyone with a home left, will look like they're living in the Bluth model...

[KansDem]

6. "That appears to be a better strategy than trying to repair some of the homes..."

One might assume that the homeowners were in arrears for quite some time. Many years, perhaps, and during this time, home upkeep was almost non-existent.

Imagine a homeowner who struggles for years just to pay the monthly bills. There is no money left over for home upkeep. Rotting floors, missing shingles, peeling paint, old appliances, broken cement...there simply wasn't enough money left over for upkeep.

So finally after many years...maybe a decade, the bank finally forecloses and is faced with a dilapidated home. Cheaper to just tear down then fix up...

[lumberjack_jeff]

8. I like this a lot.

BoA? You screwed the pooch. Give it back to the public from whence it originally came. We can better determine its best use.

[Shagbark Hickory]

9. I say amen to that. I wish they'd bulldoze the pipe farms around here and restore to forest.

[Little Star]

10. Then the bank just owns the land, right?

[bluesbassman]

12. The banks own the land currently, according to the report they will donate

the land to the local governments after demo. This helps values for the remaining properties as the demo'd property cannot be used for appraisal comparisons, and it gives the communities land that can be used as they best see fit for future needs.

[Downwinder]

11. B of A admitting they held mortgages on worthless property?

[madinmaryland]

26. Yeap.

[w0nderer]

13. gonna try my devious mind on this

first off, very little damages a house as much as not being lived in
no heat, no ac, no ventilation, most houses take damage from that, not to mention vandals
small roof leaks and pests

ok so the bank have a house they can't sell, that if it goes on the market lowers prices for OTHER houses they have..
well either sit on it and maintain it (expensive)
sell it cheap ( and kill of prices )
or bulldoze the land, probably collect insurance and/or tax break for loss of value on property
then donate the land, again probably collect tax break for donating land (that you don't want anyway cause it's unsellable in todays market) as well as the good will of the local government and shifting the upkeep of the grounds/property to where it belongs..the taxpayers..that's right, BANKS are walking away from properties so you can pay for the upkeep

when house owners do that, banks usually try to add that to the foreclosure amount (pretty well salted too)

[w0nderer]

14. food for thought

as a side issue

give the house at a low cost to a working poor or 'middle class'(i'd call it working class) family 20-60 k yearly
that have lost a house

rebuilding a house creates jobs, takes materials
spurs economy!

worst case
unservicable...
define unservicable

better or worse than:
no shelter at all?
a coat thrown over a shopping cart?
a cardboard box?
a cardboard box under a bridge?
better than freezing to death under a overpass or getting west nile by sleeping outdoors?


i guarantee there are homeless shelters that would take those houses as gifts
and get them up to good levels again with hard work

but again that would lower house prices around the area and activate NIMBY

can't have that

[marions ghost]

18. But...

we don't live in Liberal Paradise where people would do something like that. We live in No Free Lunch land. Wonderer you are a beautiful dreamer. I honestly wish there was a country where this sort of thinking would be considered but I'm afraid it is over the rainbow somewhere.

I actually wouldn't mind separating this country in half and let the Liberals live in one half and the Conservatives in the other. We could have visitation rights, but basically each could control their own piece of turf. Because the two visions of society are so divergent. I would love to live in a place where Liberals ruled and we didn't have to always fight for our very lives all the time.

[marions ghost]

16. your devious mind

makes a lot of sense to me.

[marions ghost]

15. "Only in America"

As scarcity increases, I doubt this sort of stupidity of build and tear down will continue.

[blindpig]

17. It's how capitalists resolve a 'crisis of capitalism'.

No investment? Ya gotta get rid of existing overproduced stock so there is room for investment again.

Sometimes they use bulldozers, sometimes a pink slip, sometimes aircraft and tanks.

[Oasis_]

25. I live in Cleveland

and can tell you these are dilapidated homes that no one in their RIGHT MIND would spend any amount of resources rehabbing, as their state of disrepair has rendered them light years from being remotely considered habitable.

They attract drug dealers and those looking to pick through the bones. The only workable solution is demolition.

Oasis

[Kat45]

21. There's an "oversupply of homes" yet people are homeless.

Let me try to wrap my mind around that.

[Odin2005]

22. The insanity of Capitalism. Bulldoze homes while homeless people rot on the streets.

[Volaris]

23. This pisses me OFF...

American Capitalists: We are basically going to rob you of your wealth and property, in order to make money off of it by selling it to someone else.

American Worker : But, at the price you are trying to sell it at (in a depressed market), no one can afford it, and you so can't make any money off of it anyway.....

American Capitalists: Well then we will just destroy that property, because 1) if no one is willing to help US make money off of your suffering, then no one else gets to either, and 2) if we destroy all THESE houses, it makes all the OTHER houses we HAVEN'T destroyed yet worth just THAT MUCH MORE when we DO steal them from you...(in other words, you can either help us rob yourself, or be punished severely by thinking AT ALL that it might NOT be in your own economic interests to help us do so....


I hate these motherfuckers with a PASSION. We need a NATIONAL CREDIT UNION, run out of Treasury, owned by everyone who's NOT incorporated, and who filed a tax return the previous year. Let these fuckers scream about how government can't do anything right, and therefore isn't qualified to go play in the free marketplace. If their argument is TRUE, they would have nothing at all to fear from the competition of a market competitor who can't keep up with their business model. Right?? (And EVERY TIME I raise this argument with a conservative, they look like I hit them over the head with a great big heavy BRICK.

Fuck BofA
Fuck Citibank
Fuck JPMORGANCHASE
REALLY Fuck Goldman-Sachs

[backscatter712]

27. In Detroit, it may be necessary.

There are some homes there that are in truly terrible shape. There's not much else that can be done with them.

[anarch]

28. it always bothers me that there are so many homeless people, and so many empty homes

I'm glad someone has come up with a practical solution to this problem.

[madinmaryland]

29. I wish this would happen more often. Especially for abandoned factories

that litter this country. Who owns these building? They are probably covered in asbestos and unusable, as if anyone actual manufactures anything in this country.

We seem to have a mentality of just leaving our junk everywhere here.

:shrug: