Perhaps you have some knowledge and can answer my questions:
I live in a semi-rural area that has quite a few vacant houses. I assume that most of them went into foreclosure at some point. There is one on my street that was foreclosed upon. Many of these, including the one on my street, have sat vacant for a number of years. These are not high end properties. Modest houses on rather affordable land here.
Questions:
1) Why does the bank just leave the property to rot instead of trying to sell it?
2) Why does the bank not pay for electricity so that the sump pump will, at least, keep the basement from becoming a swamp and a mold factory for the rest of the house?
I am just baffled by this phenomenon. Thanks for your time.
Perhaps because if the bank sells them they eat a loss, but if they hold on hoping for the market to recover (or somebody else to just want the land - which would explain the lack of electricity) they might get something for it.
My understanding, which is very limited, is that the houses stay on the books at the bank near their original value. If the bank sells the house at a huge discount, that loss goes on their books and the banks balance sheets look much worse. ( and who knows if some of these banks would be insolvent if the true value of the house they own were on the books)
Answer: They want the rest of you to move so they can sell large acreages to “developers” and make lots of moola
As other posters have pointed out, selling means realizing the loss - and possible insolvency for the bank if they do it to their entire distressed portfolio. The banks seem to have a gentleman's agreement to hold off on large-scale foreclosure actions, to keep all of their balance sheets propped up. In doing so, they are also keeping real estate values artificially high and severely damaging the free market, especially for younger buyers. Their game can't last forever, but no bank wants to make the first move back toward honest valuations. Better to let deadbeat borrowers live there as squatters and at least put some maintenance in the houses than to throw them out and have the houses fall quickly into disrepair.
2) Why does the bank not pay for electricity so that the sump pump will, at least, keep the basement from becoming a swamp and a mold factory for the rest of the house?
And this goes back to question 1) - why spend today's real money on tomorrow's collapsed value problem? Better from the bank's perspective to just let them sit - the places may no longer be viable residences, anyway.
Eventually, tens of thousands of these unsellable homes may have to be torn down.
I was told that banks have a lot of money on hand, and do not need to sell those houses right now. They would rather hold on to the property until prices go up again, so that they see a greater profit.