Bulldoze That House–Revisited

by Ouida on February 25, 2010

About a year ago I wrote Bulldoze That House, the original article can be found here. I was half serious and half joking when I wrote the article, but today the situation has become dire. Banks are holding onto boarded up properties deemed unfit to live in and won’t accept reasonable offers of sale. TARP has allowed them to do this. Shore up their balance sheets with tax-payer funds while destroying neighborhoods by insisting on outrageous valuations for dilapidated properties. About a year ago a property next to a commercial building that we own went into foreclosure. The out-of-town owner resisted reasonable offers of assistance from respected property managers in the area, property managers who had a vested interest in managing the property because they had owners with viable properties in the area that they were trying to protect. The property went into foreclosure and was boarded up by the bank who also resisted reasonable offers by local property management to manage the property and keep it rented. I put in an offer of $125K for each building (there are two of them) a year ago. The bank never responded to my offer. The property has recently been cited by local police as being unlivable. Vagrants have squat in the property and stolen the copper wiring. It will take tens of thousands to make the property remotely livable again. Each unit in top shape will rent for $500 dollars. There are a total of 8 units. The top value of the property is $400,000. In mint condition. The property is in far from mint condition. It is worth maybe 30 to 50 cents on the dollar as is. What does the bank want for each building? $190K. In other words they want $380,000 or mint condition price for a property that has been cited by the police and deemed unlivable by the City of Albuquerque. Credit is frozen. Don’t let anyone tell you other wise. Cash only investment syndicates are springing up all over with cash to close, but they cannot get the banks to come to the table. The banks don’t have to, they got TARP money. Smaller banks are being consumed by larger banks. Assets are changing hands at a furious rate but they are not changing hands in a way that matters, in a way that saves neighborhoods and provides livable housing. The banking sector has rebounded. The balance sheets look good, but look at the hard assets and you’ll find a cancer there like the building located at 11103 Towner NE in Albuquerque. A building priced unbelievably high because the bank can do so. At that pricing no sensible investor would ever touch it, so the bank will hang onto a non-performing asset at a totally made up valuation because they can. It is clear that we need The Resolution Trust Corporation. A government owned entity charged with liquidating the assets of banks deemed insolvent by the FDIC. The RTC worked in the 1980s during the Savings and Loan Meltdown, it would work now. Dozens of banks have failed and hundreds more are on the FDIC watch list. The assets are simply being transferred to other banks too removed from the needs of local communities to care. It has been reported that there is a meltdown coming in commercial real estate. Given the level of dysfunction that I am seeing, I believe it. I just hope that cities, banks and the Federal Government don’t wait until it is too late to try to stem the tide.

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