More Banks Pay to Fix Up Foreclosures for Resale

More banks are investing thousands of dollars to fix up foreclosures in trying to spur sales and appeal to a broader buying pool. Banks have inherited plenty of foreclosed homes that have everything from water damage, mold, broken windows, and missing plumbing fixtures.

But while banks used to be hesitant to invest much money in fixing up these homes, more real estate pros say that banks are heeding their suggestions for repairs and seeing the benefits of how a little investment can make these properties more sellable. As such, they are paying for new paint and carpet, refinishing damaged floors, replacing old windows, and repairing leaky roofs.

They hope to extend the foreclosed homes’ appeal past traditional investors and professional rehabbers. For example, home buyer would have trouble securing a mortgage on homes that lenders deem “uninhabitable” because of needed repairs.

The banks interest in fixing up these properties also can help the overall real estate market because the foreclosed properties can sell at a higher price.

Real estate agents say they are making more suggestions to banks on how to spruce up the properties. First, they identify the target customer for a property. For example, if the home will likely appeal to owner-occupant, agents may recommend fixes such as paint to $25,000 kitchen remodel.

Source: “Banks Fixing Up Foreclosures to Spur Sales; Strategy Aims to Give Them Broader Appeal, Reduce Big Inventory,” The Chicago Tribune (March 13, 2011)

Builders Promote New Homes vs. Foreclosures

Builders across the country are tweaking their marketing to make a point that foreclosures aren’t always the good deals everyone thinks they are and can come with plenty of pitfalls if buyers aren’t careful.

Builders are warning buyers to be careful before they buy a foreclosure, which they say often come with unknown repairs, limited selection, and headaches in working with banks.

New-home sales have suffered as the industry has faced five consecutive years of declines after reaching record highs the five previous years. The high number of foreclosures sitting on the market are driving new construction to a halt in some places.

That’s why builders like Lennar Corp. are trying to spread the message to buyers that purchasing a foreclosure might not be such a good deal. On the home builder’s Web site, they are featuring a special page devoted to “Buying a New Home vs. a Foreclosed Home,” which outlines the benefits of new construction, such as home warranties, energy efficiency, and customized options.

Likewise, Shea Homes and Phoenix-area builder Fulton Homes are promoting new homes with a "foreclosure cost calculator" on their Web sites, which lets customers calculate potential costs.

"There are hundreds of people who purchased homes from us that have been lured in by low prices on foreclosures, have tried to purchase those homes and have been outbid by investors," says Ken Peterson, Shea's vice president of sales and marketing. "Or, they waited months to get an answer back on `can I get this short sale, can I get this foreclosure,' only to discover that they didn't get that home."

Source: "Homebuilders Try to Draw in Buyers by Pointing Out Pitfalls and Risks of Buying Foreclosures," The Associated Press (March 5, 2011)