In an effort to reduce costs and some banks are now demolishing foreclosures. In certain cities around the country banks are donating homes to municipalities that condemn and demolish decaying houses.

Improving the Housing Stock by Reducing Inventory

The theory is that if you can demolish the lowest prices, homes in the worst condition you effectively eliminate the lowest price point option and drive up the average home price. Without low cost options investors will be drawn to consumer owned homes. In the donation process banks effectively shift the Demolition costs, which begin at $10,000, to the municipality. In an ideal scenario they will be able to sell the lot  to home builders in better economic times and recoup the demolition costs through the sale and future property taxes.

Impacting Local Markets

This strategy is dependent on the municipalities absorbing the upfront costs and there is a defined ROI to their investment. Removing blighted homes reduces eyesores and hazards.  There are efforts going on now in Cincinnati to remove blighted real estate and improve the safety of neighborhoods. Including bank-returned properties could accelerate this type of urban reclamation effort, but only if there is funding available from the municipalities.