Monday, May 04, 2009

How to prevent bank-owned homes from falling into disrepair

This is a good idea. It can also push banks to drop homes to rock-bottom prices in order to sell them as quick as possible.

12 comments:

  1. In theory yes, but part of the problem is also that homes were built in places where there simply isn't enough demand for the homes. You can drop the prices all you want, but if people don't want to live a million miles from nowhere, they aren't going to buy it. With the lower prices, a lot of the people who might have bought out this far would most likely want to be living a lot closer in.

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  2. JackRussell said...
    "You can drop the prices all you want, but if people don't want to live a million miles from nowhere, they aren't going to buy it."


    If it doesn't sell, then the price is too high. Any house in decent shape will sell if the price is set right. The seller might not like the price, but that doesn't mean it won't sell if massively discounted.

    Anytime someone says that price won't have an effect, I like to use an extreme example to demonstrate that it will. Do you think these houses (the ones in decent shape) won't sell if you drop the price to $1.00? Personally, if you drop the price down to a dollar, I'll buy it myself, move to California, and retire. If it will sell for a dollar, it will sell for some price above a dollar.

    Any house in decent shape will sell if priced low enough. The problem is that sellers simply can't admit how little the house is actually worth.

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  3. Actually, there must be some homes that won't sell for a dollar. Otherwise, the tear-down movement would not have started.

    (Time also is a factor here. perhaps it would sell for a dollar, but it would take too many months to get the word to reach prospective buyers; thus, given opportunity costs and marketing costs, it's better to tear down)

    So, I do think there are homes that won't sell, or we wouldnt see as much demolition as we're starting to see.

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  4. urbanrevivals & gates2u said...
    "Actually, there must be some homes that won't sell for a dollar. Otherwise, the tear-down movement would not have started."

    Yeah, but those are either uncompleted homes or homes that have fallen into disrepair. If a home will take $50,000 of work to make it livable then the true cost after your $1 purchase would be $50,001. At that price point, it may be cheaper to tear it down than to invest the $50,000 for repairs. My comment was about houses in decent shape. Uncompleted houses and vandalized houses are not in decent shape.

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  5. "James said...

    My comment was about houses in decent shape."

    Not always James - homes in great shape wont sell, perhaps even for $1 if they are in a bad location.

    Say I build 100 houses in cleveland where there are too many homes and not enough people. Will they sell for $1? Probably, OK

    Same thing but the house in the middle of the California Desert (Death Valley) hundreds of miles from the nearest jobs or services. Will I be able to sell them all? Maybe - Maybe not.

    Same thing, except I contract with NASA to put those 100 tricked out houses on the lunar service. Will they sell for $1? Perhaps because of the novelty, but not because of anything else.

    Still, the point holds. You need to add more of a discount for location. Best homes in the wrong areas, maybe arent even worth $1

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  6. "Best homes in the wrong areas, maybe arent even worth $1"

    I completely agree. With an inventory as large as this country has, why buy a decent home (not vandalized, etc) for $1 if you're going to buy yourself a supersize headache (worries about being isolated in your neighborhood, underfunded city governments, no neighbors, rising crime rates, too far from jobs...). There are simply too many homes that even for a dollar have too many headaches and NOT ENOUGH BUYERS are there to compete for the ones that are decent.

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  7. Anonymous said...
    "Same thing, except I contract with NASA to put those 100 tricked out houses on the lunar service. Will they sell for $1?"

    No home builder would attempt to build homes on the moon to begin with. I understand you're trying to use an extreme example to illustrate a point, but to be plausible it has to be a home built in an area where the home builder had an expectation of selling the home for $100,000+ at the bubble peak. Either that, or a home in an area like the rust belt where people are gradually leaving the area.

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  8. urbanrevivals & gates2u said...
    "worries about being isolated in your neighborhood, underfunded city governments, no neighbors, rising crime rates, too far from jobs"

    Let me point out that you listed a mix of urban and rural problems. You won't find a house suffering from all those problems simultaneously. Underfunded city governments and rising crime rates are urban problems. No neighbors and too far from jobs are rural problems.

    Even people in underfunded, high crime areas such as South Central L.A. and Harlem, N.Y. willingly pay rent, so it is implausible to claim that people won't buy a livable $1 house in an underfunded, high crime area.

    As for no neighbors, plenty of people in this country happily (and preferably) live in rural areas without close neighbors. As for not being near jobs, it has to really not be near ANY available jobs. After all, it doesn't take a high salary to afford a $1 house.

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  9. Id work at McDonald if I could buy a livable house for $1. My dad owns his own business in Annapolis (which I consider the middle of nowhere)...and he lives south of that in the sticks right on the bay. He loves living in the middle of nowhere, its ideal in his eyes. I dont understand it, but everyone in that area has the same thought process as my pop.

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  10. If the City of Annapolis is the middle of nowhere, what the hell is Wyoming?

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  11. I never said, guys, that that the list of potential problems I listed meant you had to have all the problems.

    It was simply an illustrative list of examples. For some, having few neighbors is a problem, for some it's not. But, extreme isolation is not generally favored by most potential buyers. And, a lot of these homes in CA are really isolated.

    Picking nits on the fact that the problems listed were both rural and urban did nothing to counter my argument about why buy into a headache. The sales price of $1 isn't really meaningful if there's a lot of baggage and too few buyers

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  12. "It was simply an illustrative list of examples. For some, having few neighbors is a problem, for some it's not. But, extreme isolation is not generally favored by most potential buyers."

    No but most want to have a single house with a yard and a white picket fence for the kids and the dog. Its the "American dream". City slicker living of the martini bars, 1 bedroom condo highrise and rides on the metro to work arent favored by most potential buyers either.

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