Jason Norton, a 27-year old contractor in the San Francisco Bay area, knows how to handle sophisticated remodeling projects. But these days, instead of installing granite countertops or spalike master bathrooms, he handles the lowest common denominator of contracting work: boarding up windows with plywood, hauling junk to the dump and visiting color-matching scanners at Home Depot and Lowe’s to identify which exterior color will best cover up graffiti.
Norton works for homeowners, but his clients aren’t the usual folks: They’re lenders and banks who have repossessed properties through foreclosure proceedings. With the credit markets in turmoil, home prices falling and foreclosures on the rise, the number of lender-owned homes is soaring.
Banks and lenders are in the business of making loans rather than managing property, so many have little or no staff to oversee the homes’ upkeep. Yet with foreclosures mounting, they have more property than ever before to manage. That’s why “board-up” guys like Norton have no lack of work.
“The business has picked up quite a bit,” says Norton, who began taking on “board-up” jobs in 2006 and now handles five to 10 jobs a week. “Banks can’t just let the properties sit there.”
Many local municipalities will fine a lender for letting a home and its yard fall into disrepair. Trash, graffiti and broken windows are among the issues that can result in fines because they depress neighborhood property values and also make it apparent a home is empty — inviting squatters or drug users.
The government may have bailed out mortgage giants Fannie Mae and Freddie Mac, but foreclosures are still rising, leaving a growing property management problem for mortgage lenders.
Bank-repossessed homes accounted for about 17 percent of all U.S. homes for sale as of June, according to estimates released this month by RealtyTrac, an Irvine, Calif.-based company that tracks distressed property trends. The actual number of bank-owned homes could be higher, since some are not formally listed for sale as lenders hold on to them hoping the market will improve.
Rick Sharga, senior vice president at RealtyTrac, says that under normal market conditions a lender will put a repossessed property onto the market within 30 days of foreclosure. Now, he says, the market is so backed up that some repossessed homes take as much as 11 months to hit the market.
“The complication right now is that the system is overloaded,” he says. “The volume of inventory coming back to lenders is overwhelming.”
Indeed, the National Association of Realtors estimates that just two years ago, lender-owned properties accounted for only 5 percent of all U.S. listings. Now, the trade group estimates that up to 35 percent of all listings in America are distressed, meaning they’re either already lender-owned or on the verge of foreclosure.
Some blame lenders and mortgage brokers for their role in the mortgage and credit crisis that have softened the housing market. But lenders now must pay high prices to maintain their portfolios of repossessed homes, Sharga says.
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When a lender repossesses a home, he explains, it must keep the property’s utilities running, pay local property taxes, continue to pay for insurance and often pay to repair damage done by squatters or looters (copper wire is a prime target). They must also pay for yard maintenance, trash removal and locksmith work.
When a lender formally lists the home for sale, it pays for the same cosmetic touches (painting, replacing carpeting, yard maintenance) that a regular home seller would. On average, a single home in a lender's portfolio can cost from $50 to $150 per day, Sharga says.
So what does a guy like Norton do each day? It’s actually not sophisticated work, he says, though it does require energy and stamina. A typical job takes one work day and has him hauling trash from inside and outside, changing locks, and boarding up windows. For that, he charges up to $1,500.
His most important gear is his set of battery-powered tools — often the electricity isn’t running — lots of plywood, and extra-long wood screws. Sometimes he has to clean up after other contractors, who learn that a home is empty and use it as an illegal dumping ground for hazardous materials or construction debris. He’s run across rat skeletons, basement pot-growing operations and the occasional abandoned BMW.
“You do rough work as a board-up person vs. detail finish work,” he says. “It’s about functionality — keeping drug dealers out.”
John Occhi, who sells lender-owned properties for Century 21 Crest in the Riverside County town of Hemet, Calif., has plenty of board-up guys on speed dial. That’s because lender-owned listings account for at least a quarter of the local market, based on data he’s seen.
Occhi has sold about 100 lender-owned properties during the past year, and says he typically hears from a lender within two or three days after the lender repossesses the property. The amount of work required to make a property presentable varies widely. Some properties require little more than lawn-trimming, light trash hauling, and a “sales clean.”
Others, however, require a full board-up. Occhi is overseeing the sale of a fourplex in San Jacinto that needs so much work his client will have to pay at least $5,000 for a contractor to board up 20 windows and six doors before starting on removal of trash stacked waist-high in multiple rooms.
“That’s as bad as it gets,” Occhi says.
Expedience is important in the industry: One of Occhi’s lender-owned listings is getting fined $300 per month by a community homeowners’ association because its lawn has died, so Occhi dispatched a property clean-up contractor to resod the lawn for $1,100. Norton recently worked two jobs in Oakland, Calif., where time was of the essence because the city was fining the bank owner over broken windows and graffiti.
Norton and other specialists don’t foresee an end to the business any time soon.
Occhi says he gets three or four calls a week from contractors looking to get clean-up gigs.
“I don’t believe the housing market is going to go the other way for awhile,” Norton says. “It’s not worth my pursuing the standard remodeling deals right now. Board-ups are my main business.”
Jane Hodges is a freelance writer based in Seattle.