More homeowners are seeking the refuge of foreclosure, breathing a sigh of relief and saying good riddance as they toss their banks the keys and leave behind empty houses.
It’s almost as if the new American refrain of domestic tranquility has become “foreclosure sweet foreclosure.” I wouldn’t be surprised to find a needlework portrait of that phrase hanging on somebody’s apartment wall.
Meanwhile, banks are struggling to unload these abandoned homes – a process that can take months in this market.
During those long months the homes DETERIORATE from lack of upkeep and drop further in value, adding further to the bank’s loss. No wonder so many banks are in the weeds.
But smart banks are getting creative. Recently, a VP of a five-billion-dollar bank (let’s call him Joe T.) told the Garrison Insider that banks should feel right at home with the foreclosure situation. Literally.
According to Joe, banks should be temporarily offering foreclosed homes to their employees. The idea is to let employees become caretakers – a move that can help preserve the VALUE of a home long enough to find a buyer. (Why didn’t I think of that?!)
Keep in mind the average write-down on a foreclosure is 35%. (On a 100K, the closeout take will be 65K, or even less.) “Some of the 35% often INCLUDES the loss from lack of upkeep when the house sits empty,” says Joe.
If caretakers living in the foreclosed home can keep it in good shape and reduce the average write-downs by even a few percentage points, it can mean significant long-term savings for banks struggling to stay afloat.
The brilliance of this simple idea extends to preserving the value of the neighborhood at large, and could also result in some pretty happy bank employees. Everybody wins.
So banks, give it a try. Discovering the upside of upkeep is yet another way to keep up in this market!
Looking for more ways to keep up? Contact us.
GB
Great points!