Remember, a bank's job is to lend money. Its corporate mentality, by its nature, is equipped to deal with nonpayment in a very set and specific way: the foreclosure process.
This mentality may work well in the short term, when a small bank department can handle a limited number of foreclosures.
However, the current national real estate crisis with many foreclosures in parts of the Lower 48 is a much larger, long-term problem that needs more creative action.
Foreclosed properties should not be shoved onto an assembly line where one solution supposedly fits all. Putting more homes on the market won't increase sales in a healthy way -- jobs will.
Instead, properties should fall into one of four categories in the following sequence:
1) Properties that can be rented back to the current owners to collect some offsetting income -- after all, the owners must have somewhere to live and they might take better care of their former home than would a typical tenant.
2) Properties that need minimal work and can be placed on the market for sale, once repairs are completed.
3) Properties that need some work but are in good enough condition to be put on the rental market immediately with minimal effort. A rental property doesn't have to be in as good a shape as a property for sale.
4) The remaining foreclosures are more challenging. After the most cost-effective work is completed, the property is held off the market until it can replace a property in category 2 or 3.
Regardless of which category a property fits, the first priority is to maintain visual appeal.
Maintenance shouldn't stop with foreclosure. Maintaining the yard, general cleaning and preventative maintenance help preserve the home in the best condition to sell or rent. Dumping properties on the market without preparing them guarantees the lowest price possible.
As foreclosed properties slide into disrepair, a vicious circle starts in the immediate area. As property values slide, more foreclosures may occur; the next foreclosure could be the neighbor. One problem creates another.
The second priority would be to have quick response times, regardless, whether to accept, counter or reject a buyer's offer.
In most industries, savvy sales and marketing personnel adapt their marketing to attract buyers, not push them away, particularly when dealing with problem products. Foreclosure managers need to take a lesson from this. Even though their objective is to find a buyer and sell the property, foreclosure managers don't seem to view their work as a form of customer relations. Many would-be buyers are driven away by the lack of response or shabby treatment. Unhappy customers spread the word, which can lead to others avoiding the product or expecting a real deal to justify the hassle factor. This is just the opposite of how we want buyers to react.
On a national level, we have a long-term problem and the current system is overwhelmed. Those responsible for disposing of properties don't have the property management, marketing or people skills needed to be successful. The money spent on trying to claw our way out of the foreclosure problem (tax credits, etc.) should stop. Incentives can have a reverse effect as buyers wait for the next giveaway program.
If lenders continue with the same actions, they will continue to get the same results, only to find themselves with a larger piece of the overall problem.
Clair and Barbara Ramsey are local associate brokers specializing in residential real estate. Their column appears every fourth Sunday. Their e-mail address is info@ramseyteam.com.
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