• 18
  • March
    2011

In earlier, more economically sound years, if a bank became the owner of a foreclosed home, there was little incentive to do anything but sit on it and wait for it to sell at auction. Now, however, with thousands of foreclosures clogging an already stagnant real estate market, banks are taking action to move through their foreclosure inventory. It is no longer uncommon for a bank to give a foreclosed home a facelift, from fixing a bad paint job to completely remodeling a room.

Real estate agents say they are starting to work with banks as they would a traditional home seller, targeting the home to a certain demographic and recommending repairs that will make the home more appealing to members of that group. Then banks get to work, painting walls, replacing carpet and refinishing floors, and performing necessary repairs such as patching a roof, replacing windows and doors, or ordering a new furnace or appliances.

As a result, banks are moving through foreclosure inventory more quickly, which certainly helps the lender's bottom line. But this increasingly common practice is also beneficial for homeowners, who are more likely to get a mortgage loan on a rehabbed house than on one deemed uninhabitable. In addition, taking foreclosures off the market is good for the real estate market, which cannot improve on a permanent basis until the foreclosures are gone.

The new practice is also beneficial for the neighborhoods that house foreclosed homes. Not only does it decrease the potential for vandalism, but it also ensures that neighbors' property values are not harmed from living next to a house in obvious disrepair.

Source: Chicago Tribune, "Banks sprucing up foreclosures to boost sales", Mary Ellen Podmolik, 18 March 2011