The motivation here is pretty straightforward. They get out of ongoing maintenance costs and taxes that they would have to pay as long as the property remains on the market. But the even better news is that the banks can often write-off these properties as a result. An accounting analyst the article refers to says that in some cases, banks can deduct as much as the homes' fair market value from their income taxes.

From the real estate market's standpoint this strategy is also positive. With less supply, prices will stabilize more quickly. Disposing of these foreclosures will make the market clear sooner.

And yet, the idea of bulldozing homes does seem rather unsavory, does it not? Perhaps some of these homes are condemned and/or beyond repair. In those cases, it might turn out to be more expensive to try to get them back up to code than it would be to knock them down and start over. But does this really describe all of the cases? This is reportedly happening to thousands of homes across the U.S.

My concern is that banks are using this as an easy out to minimize their loss with little concern about what's best for the U.S. economy. If some of these homes could be converted to perfectly adequate rental properties at minimal additional cost at some point in the future, for example, then this would make a lot more sense than knocking them down and building new homes from scratch.

Unfortunately, if banks are better off bulldozing than attempting to sell these homes, then that's their prerogative. After all, they own the homes and can do as they like with them. It's just pretty incredible that the market has come to this.

h/t: J.G.

Image Credit: piddix/flickr

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