Banks fixing the properties?

[Sharad M.]

Hello all,

So I was talking to a realtor this morning and I asked him why there weren't more properties coming on the market as compared to last year. He mentioned that some banks are actually fixing up the properties themselves and then listing them back on the market at or just below the market value. He said part of the reason for this was because banks were getting such bad rep because of the condition of the properties they were selling and how it was affecting the whole neighborhood.

If that's the case that banks are fixing the properties themselves, that can't be a good thing for investors looking for undervalued properties.

Have you guys noticed in your area that foreclosures have slowed down considerably and some banks are fixing the properties themselves?

[Chris Martin]

Banks and GSEs (Fannie/Freddie), collectively 'financial institutions' (FIs) manage their REO inventory to minimize costs and maximize sales proceeds. I agree with Luis that this practice isn't new. I've been aware of it since 2004... but only with low repair dollars spent. In other words clean up and paint up to sell, not rehab. What is new are some local government enforcement efforts regarding FI property and (related) the extent of some of the FI repairs.

Directly from Fannie Mae's (Federal National Mortgage Association) latest Form 10-Q is this: "Neighborhood stabilization is a core principle in our approach to managing our REO inventory. In the first nine months of 2011, we completed repairs to approximately 69,300 properties sold from our single-family REO inventory, at an average cost of $6,122 per property. Repairing REO properties increases sales to owner occupants and increases financing options for REO buyers." The wording used in this document doesn't exist in other SEC filings prior to the end of 2011Q3.

So in select areas on select properties, FIs are initiating repairs and ultimately saving taxpayer dollars... at the "expense" of an investor's next rehab project.