CNN Money reports that in some parts of the country foreclosed houses are being sold for as little as $500, with 800 or so being listed under $3,000. These are foreclosures, and the lenders are selling them cheap to get them off their books. Most of them need work -- a lot of work -- and a lot of them are in run-down neighborhoods. Many of them are in Detroit.

This is not a lead-in to a sales pitch on how to get rich buying foreclosed property. I fall asleep with the TV on sometimes and wake up to those infomercials on how to make money in real estate. What wakes me up is a little voice in my head saying, "That's not true."

Rather, my first reaction to that article was, given that the property was worth so little, why did the lenders foreclose? Why didn't they work out a deal with the owners, work out a new mortgage at what the house was actually worth, help them get some fix up money? Yes, they'd have still lost money, but not near as much as they lost by foreclosing on a house that was, essentially, worthless. They're getting nothing for the house -- the price is going to the real estate agent who's unloading it -- and they paid for the foreclosure to boot.

With a workout, people could have stayed in their houses and maybe even fixed up the neighborhood. Long term, everybody would come out ahead, because it would provide a base for the real estate market to rebound.

Of course, for all I know, it makes more sense accounting-wise just to take the whole loss. If it does, that's a real indictment of business accounting rules.

Since the lenders didn't do the sensible thing, there is another solution: Nonprofits should help low income people buy up these houses and rehab them. Habitat for Humanity could perhaps jump in here, though I'm sure there are local programs as well.

There is some government loan money available for such rehabs, and, in fact, here's another good use for stimulus funds: Jobs rehabbing old houses in run-down parts of Detroit and other cities. Hire housing counselors to work with people buying the houses so they understand what they're getting into and how to manage their money and property.

Of course, if the private sector had done its job properly -- that is, if the lenders had worked with the borrowers in the first place and if people hadn't been sold houses they couldn't afford -- we wouldn't need government and nonprofit intervention. Unfortunately, too much of our private sector is built on making a quick buck, instead of making steady, long term investments of time and money and helping grow a solid base.