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So I read an article on what a lot of banks are doing with worthless foreclosure properties – most being valued at under $10,000. It seems there’s a growing trend of demolishing the homes and donating the land to the local municipalities/agencies. Nothing amazing about that, it makes good business sense. The banks unload albatrosses that are dragging at their resources, cities get rid of blight and have the opportunity to redevelop.
The interesting part of the story was the comments. I know, I should know better than to read the comments. But it’s a little like a train wreck. You just have to look. (And I looked again – there are an unfortunate number of thumbs up on the comment that sparked my writing this…)
Today’s particular brand of outrage was, predictably, directed at the banks. About how they were horrible, and if they were just getting rid of the houses, why didn’t they just give them back to the people they took them from? Or give them to a homeless person? (…although at least the comment did specify ‘if they are habitable’, which is a pretty important distinction, and pretty unlikely, given the price point mentioned in the article)
A few sane people commented about the enormous cost of fixing up a house, and how if it wasn’t economically feasible for a bank to fix it up and sell it, why would it be possible for a homeowner – either someone who couldn’t even pay to keep the house or a homeless person – to fix it?
I have to wonder if these people have ever seen a house that’s valued at less than $10,000? A house that is deemed uninhabitable? Do they even know what is involved in fixing a house from that condition? And how dangerous it is to live in a structure that is in that much disrepair?
I would rather live in a lean-to shack in the woods than in a house like that. And that is the honest truth. Because the lean-to would offer you the same benefits as that house, namely some protection from the elements, without the dangers.
But, they might say, the house has utilities! It’s much better than a lean-to!
Okay, let’s look at this again. You’re giving the house to a person who can’t pay their bills. Either a person who was evicted for non-payment or a homeless person is not going to have the money to come up with the deposit, let alone pay the bills on a house that may not exactly be energy efficient. And that’s even if you can convince the utilities it was safe to turn them on – water leaks, gas leaks, and electrical shorts are common in these houses, either through neglect, outdated (or missing!) plumbing/wiring, or damage. But let’s say you managed to get though all of that, you’re now occupying a house that could blow up or burn down at any moment. Any water leaks are undermining the structural stability of the house, making collapse a possibility.
Yes, I’d really rather take the lean-to. Even I could build a decently structurally sound shack out of scrap materials.
People just have this knee-jerk reaction that banks and corporations are evil, everything they do is wrong, and they just… suck. Not thinking things through – not thinking at all – is a real problem. People latch onto an idea, or parrot it from somewhere, and they never think about it for themselves. They do what their friends think it right, or listen to people they look up to. And you get things like this. Yes, it’s minor, but it does illustrate the problem. And part of that problem mindset right now is that we need to give people things, because that will make it all better. But free things aren’t free.
Okay, maybe they wouldn’t have to have insurance if they owned the home outright, but then without it, if anything went wrong… Still, there’s the previously discussed utility bills and then there are taxes, on top of home repairs. Even being given a house, it’s still an enormous economic responsibility. And the low-income people that can afford that responsibility? Are probably the ones that would buy the house when it’s listed at $5,000.
This isn’t a case of ‘we’re foreclosing today, the bulldozer will be here tomorrow’. The banks try to sell the houses dirt cheap. These are the houses that no one will buy. So you want to saddle someone with a property so horrible that no one – not a private citizen, not an investment company, not a developer – will buy at rock-bottom prices? Really?
Good questions for the ‘concerned’ citizens to ask:
Are any of the properties given back to the cities then donated to programs like Habitat for Humanity?
Are any of the properties given back to the cities developed into lower income housing?
If the cities sell the properties to a developer, do they earmark that money for anything special, and/or does it help with the general budget – which includes things like assistance for people with low incomes?
I looked up some properties that might be candidates in the metro area. And I would consider this metro area to be analogous to the one they discussed in the article, home price and income wise, so the $10,000 is about equal. Let’s look at some of these:
Here’s a $1,200 listing for a house that has had significant structural damage due to a fire. The roof is starting to collapse on one side, and there is indications (the soot marks) that the fire was pretty well spread throughout the house. I’d be willing to bet the windows are all broken/gone, and the doors may be as well. The drywall and flooring inside is almost certainly toast, if not burned, then so smoke-contaminated it really needs to be torn out. There’s a chance a lot of the wiring has melted, making it unsafe to have any electricity until it is all replaced and up to code. Assuming the house is still structurally sound (beams and studs may be charred, but still holding), that’s a complete gut and restoration, including a new roof, new appliances, new furnace/water heater/air conditioner, and a new roof. Easily $50,000 worth of work to make it inhabitable. And that’s if you do the labor yourself.
Here’s a $2,500 gem, another house fire. Here they show a picture of the burned out roof, and the damaged furnace. It does look like some attempt was made to clean up, there seem to be some new patches of drywall, but there are still areas where the ceiling has collapsed, and obviously the flooring has been pulled up. So a lot of the demo has been done, but it still needs a lot. Again, easily $50,000 worth of repair before it’s even inhabitable. And, again, that’s doing all of the work (like the roofing and drywall) yourself. Because a roof will run you close to $10,000 (this I unfortunately am pretty sure of), and that’s without having to replace the burned plywood.
This is my favorite, a $4,200 diamond in the rough that has the disclaimer that ‘all the mechanicals and copper gone’ Which means no water lines, and it might even mean they pulled all the electrical wires (the grounds are copper, and a few years ago I know people were trying to steal street light wiring for the copper). It also made me realize I’d neglected the kitchen – cabinets and countertops – as well as bathroom fixtures in the previous two houses. Still, maybe the previous estimates hold, if you are handy (though you will have to pay an electrician at least to inspect and do the breaker box, as that’s required by law, and the gas company also requires a licensed plumber to work on their lines). So, I don’t know, at least $30,000 to fix up this house? Though probably more.
Maybe my estimates are low, but I doubt they are that much too high. Maybe a large developer/contractor could do it for a little less, because they get deals on supplies because they buy in bulk, and maybe you could trim the costs a little by buying used appliances and whatnot, but it’s still a huge investment. You really are talking about close to the cost of building a house.
And here’s where the neighborhood comes in. I did want to avoid too much of a discussion of it, but let’s be honest, dirt-cheap houses are not always in the best neighborhoods. And do you really want to spend $50,000 on a house that will only be worth $40,000? Some people might, if they planned on making it their home, but investors/flippers won’t do it unless there would be a significant profit margin and there’s a good chance they’ll be able to sell it. And, again, people who are willing to invest in these houses will buy them when they come on the market. Some homes are simply unsellable. And! If you have the $50,000 to fix up a house… why not just buy a $30,000 house that doesn’t need the work? You can mortgage the house payment, it’s harder with repairs (unless you have equity, which… not so much in a house that’s not worth anything).
I bought a decent house, by all accounts, and have still put a ton of money into it. Yes, some of the repairs where cosmetic and not actually necessary (the new stove, the back door, the bathrooms, the flooring, re-finishing the basement – we technically could have lived without that). But some of them were very necessary (the cracked foundation wall, the driveway that was cracking and falling into the giant void underneath it, the wood rot on the outside of the house, the windows that didn’t work properly, the garage doors that were rotting and the garage door openers that were failing, the fence that blew down). At the bare minimum, doing just what needed to be done, even if my house had been “free” it’d still have cost me over $25,000 (I really don’t want to think about how much money I’ve actually put into that house, and I have done a lot of the work myself!). And that doesn’t include the taxes and insurance, another unfortunate necessity. In five years I think that’s cost me close to $20,000.
So you want to give a person that can’t afford a $1,200 house a $1,200 house that needs $50,000 worth of work? Yeah, lemme know how that works out. At best, it’s a zero-sum game, people are still living in unfit conditions, and a derelict house is still dragging down the neighborhood value. At worst, people inhabiting a house that should be declared unsafe end up hurt.
I would much rather see the property bulldozed and something affordable – or something that benefits the rest of the community – be built there.
The interesting part of the story was the comments. I know, I should know better than to read the comments. But it’s a little like a train wreck. You just have to look. (And I looked again – there are an unfortunate number of thumbs up on the comment that sparked my writing this…)
Today’s particular brand of outrage was, predictably, directed at the banks. About how they were horrible, and if they were just getting rid of the houses, why didn’t they just give them back to the people they took them from? Or give them to a homeless person? (…although at least the comment did specify ‘if they are habitable’, which is a pretty important distinction, and pretty unlikely, given the price point mentioned in the article)
A few sane people commented about the enormous cost of fixing up a house, and how if it wasn’t economically feasible for a bank to fix it up and sell it, why would it be possible for a homeowner – either someone who couldn’t even pay to keep the house or a homeless person – to fix it?
I have to wonder if these people have ever seen a house that’s valued at less than $10,000? A house that is deemed uninhabitable? Do they even know what is involved in fixing a house from that condition? And how dangerous it is to live in a structure that is in that much disrepair?
I would rather live in a lean-to shack in the woods than in a house like that. And that is the honest truth. Because the lean-to would offer you the same benefits as that house, namely some protection from the elements, without the dangers.
But, they might say, the house has utilities! It’s much better than a lean-to!
Okay, let’s look at this again. You’re giving the house to a person who can’t pay their bills. Either a person who was evicted for non-payment or a homeless person is not going to have the money to come up with the deposit, let alone pay the bills on a house that may not exactly be energy efficient. And that’s even if you can convince the utilities it was safe to turn them on – water leaks, gas leaks, and electrical shorts are common in these houses, either through neglect, outdated (or missing!) plumbing/wiring, or damage. But let’s say you managed to get though all of that, you’re now occupying a house that could blow up or burn down at any moment. Any water leaks are undermining the structural stability of the house, making collapse a possibility.
Yes, I’d really rather take the lean-to. Even I could build a decently structurally sound shack out of scrap materials.
People just have this knee-jerk reaction that banks and corporations are evil, everything they do is wrong, and they just… suck. Not thinking things through – not thinking at all – is a real problem. People latch onto an idea, or parrot it from somewhere, and they never think about it for themselves. They do what their friends think it right, or listen to people they look up to. And you get things like this. Yes, it’s minor, but it does illustrate the problem. And part of that problem mindset right now is that we need to give people things, because that will make it all better. But free things aren’t free.
Okay, maybe they wouldn’t have to have insurance if they owned the home outright, but then without it, if anything went wrong… Still, there’s the previously discussed utility bills and then there are taxes, on top of home repairs. Even being given a house, it’s still an enormous economic responsibility. And the low-income people that can afford that responsibility? Are probably the ones that would buy the house when it’s listed at $5,000.
This isn’t a case of ‘we’re foreclosing today, the bulldozer will be here tomorrow’. The banks try to sell the houses dirt cheap. These are the houses that no one will buy. So you want to saddle someone with a property so horrible that no one – not a private citizen, not an investment company, not a developer – will buy at rock-bottom prices? Really?
Good questions for the ‘concerned’ citizens to ask:
Are any of the properties given back to the cities then donated to programs like Habitat for Humanity?
Are any of the properties given back to the cities developed into lower income housing?
If the cities sell the properties to a developer, do they earmark that money for anything special, and/or does it help with the general budget – which includes things like assistance for people with low incomes?
I looked up some properties that might be candidates in the metro area. And I would consider this metro area to be analogous to the one they discussed in the article, home price and income wise, so the $10,000 is about equal. Let’s look at some of these:
Here’s a $1,200 listing for a house that has had significant structural damage due to a fire. The roof is starting to collapse on one side, and there is indications (the soot marks) that the fire was pretty well spread throughout the house. I’d be willing to bet the windows are all broken/gone, and the doors may be as well. The drywall and flooring inside is almost certainly toast, if not burned, then so smoke-contaminated it really needs to be torn out. There’s a chance a lot of the wiring has melted, making it unsafe to have any electricity until it is all replaced and up to code. Assuming the house is still structurally sound (beams and studs may be charred, but still holding), that’s a complete gut and restoration, including a new roof, new appliances, new furnace/water heater/air conditioner, and a new roof. Easily $50,000 worth of work to make it inhabitable. And that’s if you do the labor yourself.
Here’s a $2,500 gem, another house fire. Here they show a picture of the burned out roof, and the damaged furnace. It does look like some attempt was made to clean up, there seem to be some new patches of drywall, but there are still areas where the ceiling has collapsed, and obviously the flooring has been pulled up. So a lot of the demo has been done, but it still needs a lot. Again, easily $50,000 worth of repair before it’s even inhabitable. And, again, that’s doing all of the work (like the roofing and drywall) yourself. Because a roof will run you close to $10,000 (this I unfortunately am pretty sure of), and that’s without having to replace the burned plywood.
This is my favorite, a $4,200 diamond in the rough that has the disclaimer that ‘all the mechanicals and copper gone’ Which means no water lines, and it might even mean they pulled all the electrical wires (the grounds are copper, and a few years ago I know people were trying to steal street light wiring for the copper). It also made me realize I’d neglected the kitchen – cabinets and countertops – as well as bathroom fixtures in the previous two houses. Still, maybe the previous estimates hold, if you are handy (though you will have to pay an electrician at least to inspect and do the breaker box, as that’s required by law, and the gas company also requires a licensed plumber to work on their lines). So, I don’t know, at least $30,000 to fix up this house? Though probably more.
Maybe my estimates are low, but I doubt they are that much too high. Maybe a large developer/contractor could do it for a little less, because they get deals on supplies because they buy in bulk, and maybe you could trim the costs a little by buying used appliances and whatnot, but it’s still a huge investment. You really are talking about close to the cost of building a house.
And here’s where the neighborhood comes in. I did want to avoid too much of a discussion of it, but let’s be honest, dirt-cheap houses are not always in the best neighborhoods. And do you really want to spend $50,000 on a house that will only be worth $40,000? Some people might, if they planned on making it their home, but investors/flippers won’t do it unless there would be a significant profit margin and there’s a good chance they’ll be able to sell it. And, again, people who are willing to invest in these houses will buy them when they come on the market. Some homes are simply unsellable. And! If you have the $50,000 to fix up a house… why not just buy a $30,000 house that doesn’t need the work? You can mortgage the house payment, it’s harder with repairs (unless you have equity, which… not so much in a house that’s not worth anything).
I bought a decent house, by all accounts, and have still put a ton of money into it. Yes, some of the repairs where cosmetic and not actually necessary (the new stove, the back door, the bathrooms, the flooring, re-finishing the basement – we technically could have lived without that). But some of them were very necessary (the cracked foundation wall, the driveway that was cracking and falling into the giant void underneath it, the wood rot on the outside of the house, the windows that didn’t work properly, the garage doors that were rotting and the garage door openers that were failing, the fence that blew down). At the bare minimum, doing just what needed to be done, even if my house had been “free” it’d still have cost me over $25,000 (I really don’t want to think about how much money I’ve actually put into that house, and I have done a lot of the work myself!). And that doesn’t include the taxes and insurance, another unfortunate necessity. In five years I think that’s cost me close to $20,000.
So you want to give a person that can’t afford a $1,200 house a $1,200 house that needs $50,000 worth of work? Yeah, lemme know how that works out. At best, it’s a zero-sum game, people are still living in unfit conditions, and a derelict house is still dragging down the neighborhood value. At worst, people inhabiting a house that should be declared unsafe end up hurt.
I would much rather see the property bulldozed and something affordable – or something that benefits the rest of the community – be built there.