As more and more homes in the US dip into foreclosure (up to almost 1.7 million), banks are struggling to find different ways to extract some value from these homes. Now, at least one bank is choosing to demolish foreclosed homes as an alternative to repairing and re-selling the homes. In an effort to boost the slugging housing market, Bank of America has begun donating foreclosed homes to the US government in exchange for a possible tax write-off. B of A likes the deal because it is often more economical to demolish these homes than to repair them, and local governments enjoy the free land that they can develop or the open space that results.
According to the article on Time.com:
Increasingly, it appears banks are turning to demolition teams instead of realtors to rid them of their least valuable repossessed homes. Last month, Bank of America announced plans to demolish 100 foreclosed homes in the Cleveland area. The land is then going to be donated back to the local government authorities. BofA says the recent donations in Cleveland are part of a larger plan to rid itself of its least saleable properties, many of which, according to a company spokesperson, are worth less than $10,000. BofA has already donated 100 homes in Detroit and 150 in Chicago, and may add as many as nine more cities by the end of the year.
And BofA is not alone. A number of banks are ramping up their efforts not just to rid themselves of their unwanted homes, but to fully dispose of them. Fannie Mae has a program to sell houses to local municipalities for around a few hundred dollars. Wells Fargo has donated 800 homes to be demolished since 2009. JPMorgan Chase says it was one of the first banks to begin donating houses it couldn’t sell, or didn’t think were repairable. Since 2008, the JPMorgan has donated or sold at a discount 1,900 houses to city or county officials.
It certainly says a lot that one of the largest banks feels that there is more value in knocking down a house than there is in trying to fix and re-list it. But with an exploding supply and a sinking demand, banks are forced to be creative. And while the banks may never put up enough housing for demolition to make a real difference in the housing market, it is clear that banks and other institutions are at the point where they are willing to try new things to drive up the sluggish market.
Read the complete article here.