Thursday, November 4, 2010

Problems of Half-built Houses in New Jersey and Nationwide

Half-built homes are prevalent across the country now, leftover from the real estate market meltdown and ongoing foreclosures. Many were tear-downs of existing homes, replaced by skeletal structures that neighbors fear will lower their property values.  Residents, lenders, builders, and communities all must face the problems of abandoned, partially-completed houses. 

No one company seems to be tracking the numbers, and no experts have thought of a solution.  The owners, mostly lenders, are also dealing with foreclosures and short sales of occupied houses.  Unfinished houses pose a new challenge for many communities because they have few options for how to best deal with them.  Lenders can maintain a property, but can’t improve it until they get ownership. Banks could sell such properties sooner if owners/builders would deed the property to them rather than just walking away.

“It is a national problem," said Eli Lehrer, senior fellow at The Heartland Institute.  Even when uncompleted houses are on the market, they are difficult to sell, because they often require full cash payment and face a host of construction issues that only certain builders and lenders are willing to tackle.

"With the market so depressed, some owners and banks are letting unfinished properties sit until prices improve," said John Wozniak, incoming president of the Homebuilders Association of Greater Chicago. And financing is very difficult to get for such projects. “Banks are only going to spend what they have to, because they’ve already taken a hit on the property,” he added. “They’re trying to minimize their loss, the same as any other institution.”

The Heartland Institute’s Lehrer believes the problem of half-built houses will eventually correct itself as the housing market improves. Meanwhile, he doesn’t think neighbors should worry about their property values declining. “For a typical home in a typical neighborhood, a single unbuilt house—or even a group of them—isn’t likely to hurt the value,” he said. “But the presence of an eyesore may make an existing home harder to sell.”

Some municipalities around the country have developed programs to use abandoned or vacant houses, if livable, for homeless families.  But this is just one solution to a widespread problem.

If you are interested in purchasing a home under construction in New Jersey and completing it, call or email me for some ideas.  If you are a builder who needs to sell, I can help.

Joe Giancarli, SA
Real Estate Advisor
Short Sale Specialist

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