Property restoration contractors are getting a new source of income — repairing foreclosed properties that the banks and other lenders want to include in foreclosure listings or sell through auctions.
Typically, these contractors are hired by real estate agents connected with banks or asset management companies that oversee bank repossessed properties and foreclosed properties already in foreclosure listings.
What the contractors do include cleaning the interiors and exteriors of the foreclosure houses, removing trash, repairing damaged parts, painting surfaces and do other finishing jobs.
Eric Johnson, partner of San Jose-based contractor Gibraltar Construction, said the work is fast, taking only about five days. Lenders want to put foreclosed homes into foreclosure listings as quickly as possible to lessen their holding costs. Johnson’s company specializes in flooring work, carpet installation, painting and other repair work required on foreclosed properties.
Caleb Buczek is another contractor increasing his income sources because of lots of properties being added to foreclosure listings. His company Buczek Inc. is operating in New York, but the high number of California foreclosures attracted him to the area, especially in Stockton, Modesto and San Jose.
Buczek said lenders want to put their foreclosed properties into foreclosure listings as quickly as possible to get better prices in a market battered by home prices falling rapidly.
The Mortgage Bankers Association estimated that the average amount spent by bankers in each foreclosure is $50,000, which includes costs for administration, maintenance, repair and improvements.
Real estate agents Gina Piper and Chris Kamali said the amounts they spend to restore foreclosed properties depend on the banks, which base their estimates on property condition and market competition. They also added that they can save repair costs by persuading former owners to leave the house before a deadline and in good condition in exchange for a check from the banks.
However, according to realtor David Kerr of online real estate seller Zip Realty, some banks do not have enough funds to repair foreclosed homes. Oftentimes also, the banks have lots of properties in foreclosure listings they do not have enough staff to determine which foreclosed properties are profitable to restore and which are not.
Nevertheless, restoration contractors like Buczek and Johnson said they have been getting lots of repair jobs one after the other and sometimes in bulk. Indeed, foreclosures wrecked the lives of many families, but many other families, like the families of contractors, realtors, investors, new homebuyers and restoration contractors, are benefiting from the crisis.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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