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Taking a Chance: Buyers Grab Foreclosed Homes at Auction
Posted By beth On August 15, 2007 @ 1:37 PM In Consumer News and Advice,Home Buying 101 | Comments Disabled
RISMEDIA, August 16, 2007—(MCT)—Tough luck for some spells opportunity for others.
A mortgage foreclosure means at best that someone’s payments leapfrogged past his or her budget — so far past that a lender took possession of the house. A bank holding the inert asset of a foreclosed house is a motivated seller, and there are buyers willing to take their chances on foreclosed properties.
To help buyers take that chance, Hudson & Marshall Auction Marketing of Dallas, auctioned a dozen northeast Indiana properties Tuesday morning in a meeting room at Courtyard by Marriott, 1619 W. Washington Center Road.
John Leggett, the company’s national sales manager, didn’t encourage any illusions among the 25 or so would-be buyers. Every property is sold as-is, he explained. Every winning bid has to be accompanied by a down payment of 5% of the bid or $2,500, whichever is greater, and the buyer has to pay a 5% surcharge as a fee for the auction. None of that stopped the rapid-fire bidding on the dozen houses.
The houses were run across the block with a laptop slideshow projected onto a large screen behind chief auctioneer Sam Marshall. Contracts were signed, formalizing the bids, and the room was empty an hour after the auction began.
Mark Nei was the high bidder — at $25,000 — for a duplex at 2825 Broadway. Does his $25,000 bet on this old house mean the market has bottomed out? Nei laughs at the suggestion.
“Things have not bottomed out. But when I see one that looks like a good buy, I go for it,” said Nei, who owns a used-car dealership, five other houses and a couple of construction businesses.
He’s bought and sold many rental houses in the past. In 2004, he won a $1,000 prize in the “Beautify Broadway” contest sponsored by the Shine and Hardin law firm, 2810 Beaver Ave. at Broadway, for his work on other properties he owned in the 2800 block of Broadway.
At least for bold buyers, this is a buyers’ market. Indiana has the second-highest rate of houses in foreclosure in the country, according to the national Mortgage Bankers Association. Ohio is in first place.
At the end of the first quarter of this year, 2.98% of home loans in Indiana were in foreclosure, the MBA reported. That’s more than twice the percentage of loans in foreclosure in the U.S. as a whole — 1.28%.
Why is Indiana hit so hard by foreclosures? The loss of manufacturing jobs — and the shift of many working Hoosiers into lower-paying jobs — is well-known. A factor that isn’t as well-known is that 28 percent of the mortgages in Indiana are Federal Housing Administration or subprime loans. Subprime and FHA borrowers are more likely to fall behind in payments and to enter foreclosure, according to the MBA. Those foreclosures have created a boom for Hudson & Marshall’s business. Its auctioneers and clerks travel the country, auctioning off hundreds of houses a week.
Leggett said the company has been auctioning real estate for more than 40 years, but its road work is a more recent innovation. Nine years ago, the company began scheduling foreclosure auctions in cities around the country, including Fort Wayne. Now their team shows up here about three times a year.
“Our business has gone up exponentially,” Leggett said. “When we started, we were selling 100 houses a month. We’re going to sell in excess of 7,000 this year.”
It isn’t just old hands in the rental market who venture an investment on foreclosed properties. Ilene Maurer of Garrett, for example, is a certified medical assistant and a real-estate agent. But inspired by her sister’s success in rental housing, she took the plunge. She won the bidding for a three-bedroom, one-bath house at 2067 Ontario Circle at $17,000. And a soon-to-be-vacant lot at 2707 Hoagland Ave. for $400.
Her plans for the lot?
“I’m not sure yet. For one thing, I’m going to go take a look at it,” she said.
Copyright © 2007, The News-Sentinel, Fort Wayne, Ind.
Distributed by McClatchy-Tribune Information Services.
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