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Want a foreclosed home? Prepare to bid
A sign hangs outside a foreclosed home in North Las Vegas, Nevada.
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KAI RYSSDAL: There was a time in the U.S. housing market when all you had to do was hang a sign in your front yard that said "For Sale" and then sit back and wait. Oh, what those sellers would give for a good old fashioned bidding war now, huh?
The Census Bureau tell us 8 million houses are sitting empty due to foreclosure. Prices are in the basement, bids are few and far between and so buyers have all the power. Or... do they? If you're in the market for one of those foreclosed homes, you might just find yourself taking a trip back in time.
From KQED, Rob Schmitz reports.
Joe Cusumano to home buyers: Nice home, nice view of the mountains and stuff.
Rob Schmitz: Joe Cusumano wipes the sweat off his brow as he gives a tour of a five-bedroom home in the city of Corona, an hour east of Los Angeles.
Joe Cusumano: As you can see it has a very open floor plan, and that's why the clients like it. They're going to make this their dining area.
Cusumano could be sweating because it's 100 degrees inside. The house was foreclosed on months ago and lies vacant in the desert sun. He might also be sweating, because his clients are competing with at least five other offers. Bidding wars are back, and after a year of trying to survive in a terrible market, Cusumano is once again a busy guy.
Cusumano: I have another property in West Hills. We put it up for sale on July 3. We had five offers July 4. I was getting phone calls during July 4 and I was taking them, and my wife was upset with me, but business is business.
And all this business is not what potential home buyers were expecting.
Alma Montano: I thought people didn't buy houses right now because the situation is really hard, the economy-wise and everything.
Alma Montano and her husband Jose started looking for a home a few months ago. They wanted to take advantage of an $8,000 federal tax credit for first-time home buyers. They found a house half way between L.A. and Palm Springs and bid $13,000 over the asking price. They were beat out by a higher bidder. They were interested in another home, but when they found out there were 30 offers on it, they gave up.
Just a few miles away, Chris Reynolds was also looking to buy.
Chris Reynolds: And after a week or two of looking at homes in the process, we were starting to get discouraged.
Reynolds began looking for a home for his family in December. The 41-year-old figured he'd find a place by the end of June, when their lease was set to expire. But when he and his wife bid on their first property, they lost out in a bidding war. The next weekend, it happened again. And again.
Reynolds: We would visit them, we would look at it, we'd like the neighborhood, and we'd get excited, and we'd bring our kids along, and they would, you know, "This is my room," you know, the backyard, we can do this and that, and it got very, it really did put a strain on our marriage.
In four months, the Reynolds made offers on 20 foreclosed properties. All of them had multiple bids that went over the asking price set by the bank that owned the property. But instead of accepting an offer, many banks would take the house off the market and re-list it a month later at a higher price. This happened over and over, says Reynolds.
Reynolds: To me it didn't make any sense. I think they were just getting a feel for what they could get for that house."
Reynolds: So it's four bedrooms in all. And this is actually our room.
The Reynolds finally had the winning bid on this three-bedroom home, after months of frustration. Real estate agent Joe Cusumano says the banks are overwhelmed by mortgage defaults and loan modifications. He says they're in such a hurry to unload these foreclosed properties that they often don't know what they're worth.
Cusumano: It's probably exasperating when they have to field so many calls and e-mails and stuff like that too. But I still think banks should put something in place to make it a lot quicker than what it's working.
Cusumano doesn't expect the bidding wars will last. Especially after the tax incentives for first-time home buyers run out in December. He says without the tax credit and with another surge of foreclosures expected this winter, home prices will just go back down.
In Los Angeles, I'm Rob Schmitz for Marketplace.
We would visit them, we would look at it, we'd like the neighborhood, and we'd get excited, and we'd bring our kids along, and they would, you know, "This is my room," you know, the backyard, we can do this and that, and it got very, it really did put a strain on our marriage.
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Perth Adam
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<a href="http://auctions.fastrealestate.net " rel="dofollow">foreclosure auctions</a>
Went to a REDC foreclosure auction in Washington, D.C. last weekend. Won the bid. Met with Bank of America, the owner, and a title company. Gave $. On Tuesday, they called and said I was rejected unless I gave them more $. How much more do you want, I asked, how much more will you give, they replied. Not Bank of America, not the tiltle company, not REDC are willing to say what the reserve is and all actually claim they don’t know. It’s disappointing. Don’t know if it’s a calculated scam or uncalculated incompetence. They also said that even though I won the bid on Sat, if someone called on Monday and offered more $, they would get it. I agree with the poster who thinks these homes will become rental properties.
I'm a real estate broker in the Bay Area. Our story is the same as you report BUT I'd add that real first time (or in this environment, second time) homebuyers who need FHA guarantees in this climate--that is, anyone who doesn't have $100K in cash to put down on a typical $500K East Bay home--will generally lose out every time in those competitions to investors.
REO property owners/managers do not want to get stuck with the uncertainty about appraisals, inspections and timelines that goes along with FHA loans (don't get me wrong; I'm generally pro-FHA and was a HUD appointee in the Clinton Admin).
They'll take an all-cash or mostly cash offer from an investor--who will put a renter in the home--in a second, if they can.
Let me know if you want more details--I recently sent a longish note to a friend looped into the Obama Admin going into greater detail on concerns, perverse incentives; and posing the question: Are we really intending to increase the proportion of renters at the expense of homeowners, from a personal and neighborhood point of view?
