The Chicago Tribune reported today (March 17th) that Banks are increasingly likely to fix up foreclosures before they market them for sale. The idea, according to the article, is that real estate professionals are telling their banker-clients that a little repair can make the property more sellable.

This idea came conveniently unencumbered by data. It seemed unlikely to to be true because any one who buys bank-owned properties know that  there never seems to be a shortage of buyers for foreclosures: Banks can - and do - slash their REO prices until they're low enough to attract a buyer, regardless of condition. Remember, profit from sale isn't the motive - speed is!

So we decided to dig deeper and see if our instincts were wrong (they weren't!). Here's what we found after a cursory examination of the data:

In the central Florida market (which includes Tampa Bay, Lakeland, Orlando and the Space-Coast), we've had almost 38,000 foreclosure sales over the last 12 months.

The number of foreclosure sales was up 49.9% from February 2010 to February 2011.

The time it takes to close on a foreclosure sale has increased steadily over the last 12 months - from a low of 75 days in April 2010 to a high of 100 days in February 2011.

The median sold price of foreclosures during this period peaked in June at $77,500 (the expiration of the home buyer's tax credit). It has since fallen off more than 12% to a median sold price of $68,000 in February 2011.

There is no difference in the size of foreclosure sales over the last 12 months. The median sold size is 1,400 sq.ft in February 2010 and 1,400 sq.ft in February 2011.

So now that we've studied the data, here's what we know: If banks are spending good money on fixing up foreclosures:

It's not adding a penny of value to their homes. The median sold price of a foreclosure is down - not up - as you would guess that it would be if banks are making improvements.

It's not speeding-up the sale process. Foreclosure homes are taking 33% longer to sell now than they were at their quickest time over the last 12 months.

Foreclosure sales are way up - almost 50% - but there's no empirical evidence that it has anything to do with the fact that Banks are fixing them up first.

Banks may want to look more closely at the return they're getting on their rehab dollars. But then again, if profit isn't the motive, then why bother?