Real estate investors have been renovating properties for years in order to sell them more quickly and at a higher price point. Banks, on the other hand, have tended to let their REO properties remain largely “as-is” when they market them whenever possible. Now, however, with so much competition for buyers, many lenders are “sprucing up” their REO properties and foreclosures in an attempt to attract qualified buyers who currently have their pick of a vast inventory of homes.
However, not just any house will qualify for a lender fix-up. “There is no sense in putting in a furnace…if it’s just going to walk away the next day,” explains one real estate agent. Neighborhoods that have a high risk factor for vandalism are not likely to see many bank rehabs since the lenders tend to see this as “throwing good money after bad” and fear that a restored home will still not appeal to buyers because of the area.
It seems like this new policy certainly can’t hurt REO sales, but it also seems to leave a lot of already blighted areas of the country “out in the cold.”
We’d like to hear from you. What do you think about lenders fixing up properties before selling, and do you think this practice has had any impact on real estate overall?
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One part of the housing market experiencing a rebound that will probably continue even if the rest of the market remains sluggish is remodeling.
A recent report by the Joint Center for Housing Studies at Harvard University predicted that remodeling would rebound strongly this year after a three-year downturn. Annual growth in remodeling is expected to be around 8 percent.
In fact, the study found, the remodeling market held up far better than housing construction during the recession, with annual spending still close to $300 billion. But as the market for renovations picks up, it may be a good time to consider the problems that could arise.
A group of leading insurers said renovations are a constant source of large claims on homeowners’ policies. And among claims, fire is the most common cause.
Whether the homeowner wants to add a new kitchen or repair years of neglect, the cause of renovation problems is the same. Homeowners are concentrating on the outcome, not on managing the process. Any homeowner planning a sizable renovation should hire a contractor, for efficiency and safety, insurers say.
The one constant bit of advice from insurers is to tell them about your renovation before you begin it so they can tell you what to look out for and, of course, increase your coverage.
But the best policy is still vigilance. The top thing to monitor is oily rags, which strike fear into the hearts of risk assessors. These rags catch fire easily if they are not disposed of properly. The solution is to make sure the rags are put in a locked, fireproof box at the end of each day.
Second on the risk list is the debris from the welding and soldering equipment used on roofs or for installing plumbing and electrical wiring. A common disaster, Mr. Raphael said, happens when a pipe is welded but no one checks to see if any solder has fallen onto the debris below. It can smolder for hours and catch fire later that night.
Thinking about the disasters that can befall your home for the sake of a nicer, updated bathroom may put a damper on some people’s enthusiasm. It can be scary, but if certain things are done, it can be fun and successful.