Bulldozing the Past - Half-built Homes Hit the Dust

If you live in Florida or other areas with high foreclosure rates, you may have wondered why homes continued to be built in many areas. Keeping in mind that there's always some market for new homes regardless of economics, more homes appeared than buyers with money. For many builders, who had already secured financing and who just finished the job as far as the financing covered, it became a waiting game to determine what to do with there properties.

With half-finished construction on their hands, builders had to make a choice of what to do with the property. Some waited it out to complete the project. Some finished the project and hoped for buyers and now are trying to sell new homes that actually are a couple years old, though they have not been lived in. Some went bankrupt or had the property foreclosed on. The banks that own the assets were then forced to make a decision on what to do with the partially completed homes.

One Texas bank that found itself owning 16 homes in Victorsville, California decided to demolish them. Home values in the Southern Califiornia area had dropped 60% since 2006 when they were started. The homes, some nearly completed, had been vandalized and stripped of any thing of value. Squatters and drug traffickers took up residence. After comparing the million dollars it would take to complete the homes and then sell them at a loss, the bank decided to demolish them for around $100,000.

When information about this decision hit the Wall Street Journal a couple weeks ago, reader reaction was strong. The many opponents suggested that the bank should have sold the properties at cost or donated them to needy families in return for sweat equity or to non-profit groups. The reality is that had the bank completed them, they would have assumed liability for them and been on the hook for years as they would be considered the "dealer." Most banks, already thrust into the real estate business via REO homes, are not looking for long term obligations for more property - especially since homes left unfinished may have many hidden problems.

In Florida, there are many partially finished homes, often from bankrupt builders. These homes can be good values for buyers willing to hire a contactor to oversee completion and find a bank that will finance them. There are certain things to watch with this type of home which we will consider next time in this blog.

For a good selection of new and pre-owned homes, including Florida foreclosures and bank-owned, Janice Petteway and the Exit Real Estate Results Team knows Central Florida real estate. Check out her website today.