It appears that banks are in the deconstruction business now. Having so many foreclosed home on the market just isn’t good for business. For one thing, a glut of unsold, repossessed homes for sale clogs the market, delays sales and drags down the average market price. Plus, as long as the banks own the foreclosed properties, they have taxes and maintenance expenses clawing at their wallets. To lessen the sheer volume of available, repossessed homes and to prop up market prices, banks have called in the bulldozers to demolish the homes they’d rather not wait to sell.

Among the almost 1.7 million homes in foreclosure, there’s a certain percentage that aren’t very valuable. Some are worth less than $10,000, according to Bank of America. Once the properties are leveled, BofA donates the land to the city, which, in turn, uses the land for parks, urban gardens, further development or open space. BofA recently donated 250 homes in Chicago and Detroit and plans to donate 100 more in Cleveland. BofA plans to add several more cities to the list by the year’s end.

To the bank, any property that can’t be sold is an expense. In some cases, demolishing the home is cheaper than paying taxes on it. The federal Neighborhood Stabilization Program lessens the costs of demolition for the banks from $7,500 to $3,500. For their donation, the banks can take a tax write-off equal to the market value of the property.

BofA isn’t alone when it comes to wielding the bulldozer. Since 2009, Wells Fargo donated 800 properties. JPMorgan Chase was the first to unload houses they couldn’t sell. They drastically reduced the price or gave away 1,900 houses. Even the federal government has been tearing down unwanted homes indirectly. Fannie May has demolished houses as well. They also sell their unwanted properties to local communities for under one thousand dollars.

On the surface, this seems ridiculous, but it makes good business sense. With 1.7 million homes in foreclosure, destroying several thousand will only deplete the least desirable homes. That will help lift real estate prices and shorten the time it takes to sell houses that are already on the market.

It’s hard to believe that all these homes were unsuitable for habitation. Perhaps it would be better to donate the properties before they’re demolished. Then they could be converted to rental properties or re-purposed for other uses. Banks aren’t known for thinking about the community. Banks are in business to make money. If demolishing the bottom of their barrel makes business sense, the bulldozers will continue to bulldoze.

With excess, dilapidated homes dragging down the market, this move by the banks could be a blessing in selfish disguise. Available houses should sell more quickly and for a better price. That could trigger a turnaround for the beleaguered real estate market.

Wendy Rawley

www.GO2WENDY.com

Prudential California Realty