Foreclosed properties draw eager bidders
By John Leland
New York Times News Service
MINNEAPOLIS — In a down real estate market, they came to buy. They came early, they came in numbers and they came with bank checks for $5,000.
By 10 a.m. Saturday, more than 700 people filled a hall in the convention center here for what real estate agents say is the largest auction of foreclosed properties ever in Minnesota, with more than 300 houses or apartments for sale in two days. Opening bids ranged from $1,000 — for a three-bedroom house — to $729,000, for a five-bedroom house on 11.9 acres. The crowd was standing-room only. Some were looking for homes, others for investments.
"It’s a symptom of the foreclosure crisis," said Jim Davnie, a Minnesota state representative who sponsored a newly enacted bill to regulate subprime mortgage lending. "And it’s a cause for concern that through this auction, areas that are already hit by the foreclosure crisis will now be hit by investors who are buying up properties to rent them out, which makes neighborhoods less stable than owner-occupied housing."
But in the loud, overcrowded hall, the misery of subprime loans, exploding adjustable rate mortgages and slumping real estate sales meant one thing: opportunity.
"Who’s got $150,000?" said the auctioneer, Mark Buleziuk, motor-mouthing the sale of a four-bedroom house that he said was worth $234,000. "It’s a buyer’s market," Buleziuk urged.
The auction, like others that have proliferated around the country this year, tapped the contradictory forces of the current real estate market, in which mass foreclosures and sinking home values, along with predictions of more pain to come, still stoke the urgency to buy right now, before it is too late.
"The market’s really low right now, so you can get a good price," said Lori Crook, a food server at Keys Cafe who said she was looking for a place she could fix up and sell. "Even if you can’t sell it right away, if you just sit on it and sit on it, it will go up. The only sure thing these days is real estate."
The auction involved a tiny fraction of foreclosures across the state. Julie Gugin, executive director of the nonprofit Minnesota Homeownership Center, projected statewide foreclosures at 20,000 this year, up from 11,000 last year.
"This is such a stark and dramatic illustration of how serious the problem is," said Ron Elwood, a lawyer at the Legal Services Advocacy Project, which lobbies in the interest of low-income residents in the state. "The reality is, half the reason 300 homes are being auctioned off is that speculators tried to make a killing and failed to do so." In Minneapolis, 55 percent of foreclosures this year involved houses not occupied by their owners, according to county records.
But instead of alarming buyers about the risks of speculation, the auction of so many foreclosures at once was an invitation to speculators, small and large. Some, including Bryan Kihle and Jim Casha, who bought a four-bedroom house for $145,000, bid without seeing the properties. "I just looked at the picture and thought if we got it cheap enough, we could rent it for a year, then sell it when the market goes back up," said Kihle, a building contractor. One public interest group bought eight properties to restore for low-cost housing.
Others just saw a chance to enter the housing market. "It won’t always be low," said Pearl Dobbins, who said she was willing to spend up to $50,000. "This is our chance to buy a home and start our financial future."
The boom in foreclosures has also meant opportunity for auctioneers like Real Estate Disposition Corp., based in Irvine, Calif., one of several firms around the country that act as agents for lenders that need to unload the record number of properties they have repossessed this year. The corporation, which ran the auction here, started in the 1990s but was dormant from 1998 until this year, said Michael Schack, a senior vice president, because there was no need for it.
Paul Schoenecker, owner of a local franchise of HomeVestors, the people who post the "We Buy Ugly Houses" billboards, said a minority of the sales were true bargains.
Even so, Schoenecker bid on some properties. Buyers were required to provide a $5,000 bank check, along with a personal check to bring their contribution up to 5 percent of the purchase price. Once they placed a winning bid, they proceeded immediately to financing tables in the back — with no opportunity to further inspect the property or negotiate repairs. Representatives from two lenders, Countrywide Financial and Bear Stearns, were on hand to provide mortgages — fixed, adjustable, jumbo or interest-only. Countrywide and an affiliate of Bear Stearns were also among the lenders selling properties at the auction.
The bidding for most houses took less than three minutes. The sales will take about three weeks to become final.