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Scott Jagow: There is another side to all these new foreclosures — it’s keeping people who buy foreclosed homes very busy.
Joining us now is Sean O’Toole. He runs a website called ForeclosureRadar.com. It tracks foreclosures throughout California. Sean, exactly how does a foreclosure auction work?
Sean O’Toole: The auction itself is very informal. You walk up to the courthouse steps. At the allotted time, somebody will walk up with a clipboard and start selling properties. Around this person will gather four or five typically season investors, and the seasoned investors maybe have a million dollars each in their pockets.
Jagow: Uh, literally?
O’Toole: Literally, yeah. Cashier’s checks. One to two million dollars a piece is not unusual.
Jagow: There’s got to be some aspect to this that’s unsettling, because you’re dealing with people who can’t pay their mortgage anymore — and I’m sure they don’t want to leave their house because they may not have any other place to go.
O’Toole: One of the things to keep in mind is that it’s been at least a minimum of six months since this person stopped making their payments, and it’s not unusual for it to be a year or more. So by the time the foreclosure investor gets to that door, the folks pretty well understand that they’re not going to get to live there forever for free.
Jagow: Anything else that strikes you about what’s going on right now? The environment, with so many foreclosures happening?
O’Toole: Well you know, probably the biggest thing I see is everybody talks about this being a subprime issue. Certainly, these low teaser rates that allow people to buy more house than they can afford. But something that’s not really talked about a lot that I’ve seen when I’ve tried to sell my inventory is that I’m really competing with the new homebuilders, and the new homebuilders have really lead prices down. You know, in Mantica, California, there were homes selling for $670,000, Anderson homes. They recently held an auction, and that same subdivision, that same $670,000 property was sold for $380,000.
O’Toole: You know, if you paid 670 two years ago, and you can now buy that same house for 380, it’s awfully hard to find the will to keep making the payment.
Jagow: And Sean, are you buying houses yourself?
O’Toole: Well I gotta tell you, I’m certainly a lot more careful now than I was two years ago. There’s a good business there, but you have to be really careful about what you buy because, you know, if you buy in the subdivision next door to the one that Anderson homes is going to discount by 20 percent next month, you have to be real careful.
Jagow: All right. Sean O’Toole, his website is called ForeclosureRadar.com. Thanks for joining us.
O’Toole: Thank you.
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