Housing bust is boom for ‘board-up’ specialists

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.

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.

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