Want to know where the money’s going that taxpayers are handing over to the GSE’s? Upkeep! All those foreclosed homes sitting empty need to be updated and maintained. NPR had a segment on how much it costs Fannie Mae to mow and edge a town home in Landham, MD, for a six-month period of time—about $450. Doesn’t seem so bad, until you understand that Fannie Mae has about 153,000 foreclosed properties.
PeekInTheTent wanted to get an idea of what it would cost per foreclosed property to return the home to marketable condition: patching and paint, new cabinets (the owner tore them out) and carpeting. So we talked with a contractor about how much a low cost update would be. Here are the numbers:
Assumptions: Standard 3 bedroom, 2 bath house (2,000 Sq. Feet)
Patch and Paint $2,000
Cabinets $4,700
(18 cabinets x $400 per)
Plus install ($25 per cabinet)
Plus Counter-tops
Carpeting (120 yards) $2,000
Mowing/Edging $ 480
Contractor/Supervision $1,500
Total $10,680
Now we’re talking some serious money (for me at least, maybe not for the Federal government) of about $1.6 BILLION.
Now, consider that this is a low figure, as according to Elonda Crocket, an executive at Fannie Mae who deals with managing the portfolio of foreclosed properties, the costs for that townhome will actually be more like $15,000 due to replacing torn out air conditioners, missing copper piping, disappearing light fixtures, etc. If even half of properties needed that level of repair, the total would be more like $1.8 billion. “We want them to be good enough that a first time buyer will think it is good enough for them to live in,” said Crocket on NPR.
And that, of course does not include all costs. According to NPR, Fannie racked up $488 million in the first quarter of this year for holding costs (insurance, taxes, and maintenance); valuation adjustments for changes in market value; gains/loss when the property is sold; legal fees; eviction costs; weatherization so the pipes don’t freeze; cost to secure the property and more.
Fannie doesn’t have a lot of options, since they want (need?) to stabilize neighborhoods so that there is some potential residual value in the home. They don’t want to have the neighborhood go into decline, putting more downward pressure on overall house prices. In2010, Fannie did “fixes” for 87,000 homes.
Bet they get a real bargain price for their carpet buys…
Anne Murray-Randolph is a specialist in the real estate consumer, providing data-based knowledge and perspective to the industry. She was also the co-founder and publisher of LORE: Lives of Real Estate Magazine. You can find her as “peekinthetent” on Twitter and the Real Trends Blog.
