Adding Style, Decorate Vacant Properties
Virtually every mortgage servicer out there today is being more aggressive about rehabbing REO properties.
A lot of companies are looking at repairs so they can be FHA approved, stresses Cheryl Lang, president and CEO of Integrated Mortgage Solutions in Houston, a provider of asset management services, including repair and preservation. She says a little goes a long way when it comes to trying to stimulate buyers to move into these properties.
“I spoke with someone yesterday, that’s all he does — repairs properties for FHA lending. More and more people are doing that because FHA is the lender of the day again,” said Ms. Lang.
“I think we are going to see more people repairing properties and not selling them as-is to get them to move quicker. Get first-time homebuyers in and others who want to take advantage of the first-time homebuyer incentives that are going to run out at the end of the year. But I think they will probably be approved again like Cash for Clunkers.” Servicers and lenders are also going to stagers for help, she adds, using their expertise to add subtle ornamentation to various rooms, including the kitchen and living room, so borrowers are not walking in blindly to an empty house. "It’s kind of like a blank canvas, where do you start? If there is nothing in the home, you can’t picture yourself in that property.” If asset managers use sprinkles of colorful accents such as flowers and candles, prospective buyers are apt to see themselves in that property more so than if it’s just empty. “When my husband and I moved, we had to move out of our house because our other home was done, and it was a vacant property. Our Realtor told us, ‘You have to put some items here, you have to put something there.’”
The couple’s Realtor advised them to make little vignettes, adds Ms. Lang. “You add a chair and a table over here. Put some bar stools around the bar, so people can sit down and can visualize themselves being in there. And we did that. I think it was a good idea,” she said.
“We moved a mile-and-a-half away from our house, so we were over there all the time. I would go over and take a few chairs and a few pictures and hang them up. Artificial plants. I think it did help. In our house, we had cream-colored walls. No color at all. We kept it that way because we knew we weren’t going to live there forever. You want to have it kind of vanilla so you don’t offend anybody when they walk in the door. We put splashes of color around. It made a difference. It doesn’t cost much. You spend a couple hundred dollars just on some accessories and you’re done.”
In the high-end properties, asset managers are having faux borrowers and faux occupants where they put a family in the home. They move from house to house to make it look occupied. “It’s much easier to sell a house that’s occupied then one a vacant property. They don’t rent; they just live there. When the property sells, they go to another property. Those are the pretty high-end homes that they are trying to market, not the $150,000 house.”
The mortgage industry will get through this difficult cycle, but it’s going to take a while, and in the meantime, Ms. Lang believes the industry needs to change its outlook.
“We’re talking about people underwater where they paid $500,000 and now their home is worth $200,000. They will never see that come back in their lifetime,” she said. “Maybe we need to rethink how we see being a homeowner. I was telling a guy, ‘It’s a roof over their heads. Let’s get back to basics.’ It’s where you live. We need to stop looking at it as an investment and look at it as a basic need.”
At the end of the day, she says, “if my house is worth half of what I paid for it, I’m still going to go home every day, I’m still going to go to bed every night. If I can afford to pay for it, I will.”
Ms. Lang doesn’t see the possibility of anything new being created until money starts loosening up. “I think we’re still going to be ultra conservative and risk-adverse. It’s still going to take you 60-90 days to close on a house where it used to be days. ‘You’re approved. Wow, that took an hour.’ Those days are gone. I think we’re going to go back to the old ways. The pendulum is going to swing way the other way now.”