In keeping with my desire to post other opinions of reasonable issues, real estate related mostly... with a flash of local politics as well... another letter from a MOCO reader has appeared.
Without further ado, I'm passing this along from Michael Allison. Here is his take on an idea for what to do about foreclosures, banks, and vacant homes.
As you know, banks and other lending institutions own more real estate than ever before and they are just sitting on them. The longer they hold them the more the price goes down, until eventually an investor buys the property - rehabs it and resells it making a profit. Nothing wrong with that.
However, here is what I would like to see happen. Each bank that owns property opens a division in their bank that operates as an investor with a twist. Using fix and flip formulas, the bank picks houses with a lot of equity and very few issues to habitability and gets it ready for move-in. Then they hire a management company to get the unit sold on a lease to own contract. Management companies require nothing out of pocket. They only get paid from a portion of the rents. Now, the house that was just drawing money is now producing money. All of the costs to the bank will be pulled from the equity in the house on the final purchase price. Lease to own contracts are the least expensive and will put Americans back in houses. So, instead of the investors making all of the money, Joe the plumber ends up in a house with a little bit of equity and the banks no longer have property on their balance sheets making it difficult to lend money. At the end of the lease period, the bank provides a loan to the home owner. Which is how they make money in the first place. Everybody is a winner. I am a contractor and I want to help rehabbing these house so the economy can start moving again. Please contact me so we can worked this out.
I have been pushing this idea around for a couple of days now and I have heard that banks do not want to be in the real estate business. They don't like to allocate the resources to deal with delinquent mortgages and foreclosed properties. What they are effectively doing is pushing their head in the dirt hoping the problem will go away. If they let the properties go for 50% of value instead of the 80% they are holding out for, the properties would be flying of the shelf. Maybe you could help them realize that they are in the Real Estate and make them use some of the bail out money to get these house off their books by fixing them up and selling them.
If you would like to contact Michael, please email me and I'll forward it on to him.
Thanks for the mail Michael, and readers please feel free to drop me something that you might want to share on subjects often covered on the MOCO blog.