The burst housing bubble has brought down more than a few businesses.
Some residential contractors hang on by doing repair jobs. On most jobs, a lot of people chase a little bit of work, building experts say. But many have found opportunity in the very segment that has pulled down the housing industry — foreclosures.
Fred Davis, owner of Davis & Associates in Chester, runs five paint crews to keep up with demand from lenders itchy to get repossessed houses on the market so they can recoup losses.
“We’re painting all the time all over central Virginia,” Davis said.
“Contracting is not what it used to be, and building is not what it was in 2005,” he said. “It’s very competitive.”
Davis was doing high-end additions and building houses, but he switched his business model to repair foreclosed houses.
Putting a vacant and often-blighted property back into shape improves a neighborhood and gets another foreclosure off the market, Davis said.
Plus, it keeps him busy. “The repair work is pretty steady.”
It’s also demanding, requiring a fast turnaround, he said. “Lenders want a house repaired as fast as possible.”
Most jobs are $10,000 to $15,000, Davis said, but if a house needs new carpeting, vinyl siding, countertops, cabinets and a roof, the cost can quickly add up to $75,000.
Investors and first-time buyers often purchase foreclosed houses, fix and flip them or live in them.
Lately, banks see the value in fixing the houses and recouping more of their losses, said Brian Liggan, owner of Virginia Capital Realty in Richmond, which lists and sells foreclosed houses in central Virginia.
“If banks see that it will behoove them to get the work done, then they will,” he said.
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Aaron Jeffrey of A. Leigh Construction in Chesterfield County still owns the last home he built on speculation and finished in 2007 soon after the housing market crashed.
“The news got worse and worse, but when you have that much money tied into it, you have to finish it.”
When the $425,000 house in the Bon Air neighborhood south of the James River didn’t sell after six months on the market, he leased it.
He kept his business going, also doing repair work, and just completed the type of work he prefers — a $100,000 kitchen remodel near the Stonehenge Golf & Country Club in Chesterfield that features top-line appliances and an island with a marble top.
“We love kitchen and bath remodels,” he said. He’s survived in this environment, though, doing maintenance jobs.
That could mean replacing 30-year-old cracked tile in a bathroom, for example, or tearing out an acoustical ceiling and vinyl tile in a basement and upgrading it.
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Scott Ukrop offered a remodeling business from architectural design to construction through his company, Grace Street Home Additions.
“People liked the idea of a turn-key approach,” he said.
Realtors, who often deal with ill-planned and executed additions, loved the concept.
But his business coincided with a difficult financing environment, waning consumer confidence and a sputtering economy.
He closed shop last year when he realized the building trend was “paint and powder,” not major overhauls.
Homeowners are still slow to commit to a major remodel, although remodelers are receiving more calls for work, according to the Association of Home Builders.
“While credit scarcity and economic uncertainty continue to weigh down remodeling, signs of increasing consumer interest are promising,” David Crowe, the group’s chief economist, said in a report about the remodeling market.
The builders’ Remodeling Market Index, a measure of activity, rose to its highest level in four years during the first quarter, an indication that remodeling is heading into recovery.
Charles Aquino, a Richmond architect, said most homeowners who proceed with major renovations are committed to staying in their houses, in light of falling home values and a sketchy sales market.
His clients are renovating second homes or building their last houses, so he said he hasn’t been as affected by the downturn as other professionals. Still, “people are very careful about what they do. Price is paramount in their decision,” he said.
Aquino said he’s been through a couple of housing recessions. “The difference this time is no one has seen a bottom.”
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John Pollard of Pollard Environmental in Rockville said he had to lay off a few people in 2008 but has maintained a staff of about 15 by dealing with underground oil tanks at foreclosed houses.
“Doing some work associated with foreclosures is better than no work at all,” Pollard said.
“The work has not been a boon or a windfall, but it has helped us stay busy.”
Alan Mitchell of Mitchell & Young in Chester said his heating, air and electrical company is booming.
“I am swamped, and not just because of foreclosures,” Mitchell said. “Everybody who works for this company is a go-getter. It takes go-getters to keep a company going.”
About 40 percent of his business is dealing with foreclosures, but if that business should dry up tomorrow — which it won’t — his company will be OK, he said.
“It’s unstoppable,” he said, attributing much of his increased business to his merger in January with Robert Young, another contractor.
Working for lenders who want to get houses on the market as soon as possible requires a certain mind-set and attitude, Mitchell said.
“As soon as they call, I am there. That is why they love me. Whatever it takes to make them happy, I do it,” he said. “I don’t know if I am just lucky. But to me, it seems the economy is coming back.”
Source: www.timesdispatch.com, CAROL HAZARD