RISMEDIA, Oct. 15, 2007-(MCT)-Like house hunters, even some real estate investors have stopped buying foreclosures.
That’s what some local experts said Thursday as RealtyTrac, an online market for foreclosed properties, reported a 27.4-percent jump in Nassau’s foreclosure-related filings from the second to third quarter while Suffolk’s was up 14.4%. Those increases cover any multiple filings per house, such as monthly default notices, but there’s little question that foreclosures have ballooned to create a trickle-down economy — good for real estate professionals and bad for lenders.
“The investors are not even buying the foreclosures” at auction, said Mineola real estate attorney Michele Messina, who represents lenders on foreclosed homes. “They’re watching and waiting. If they’re purchasing something at auction, two or three months down the road, those prices are dropping again.”
In the last six weeks, Messina said, she has had two cases of prospective buyers walking away from their down payments — it’s the first time in 22 years that anyone has done that in her experience, even when the funds required by lenders range from $5,000 to $10,000.
“They can get another home or another condo or townhouse for $20,000 or $30,000 less than what they entered into two months ago,” she said. “Maybe the next property . . . was even better equipped, updated, newer kitchen, newer this, newer that, for $30,000 under the value that she already was in contract for. She’s walking away from 10n but she made 20.”
While quarterly numbers rose for Long Island foreclosure-related filings, September numbers actually went down 23% from August for Nassau — 352 compared to 457 — and it went up for Suffolk by 60% — 638 compared to 398, according to RealtyTrac.
Nationally, September’s 223,538 filings, from default notices to auction sale notices, went down 8% from the 32-month high in August, RealtyTrac said. But the number is still up 99% from the same time last year, its report showed.
With foreclosures growing in general, some said buyers’ wait-and-see approach makes sense in a market that can be unpredictable, especially if property values are going down faster than they can flip a house, said Bruce Bergman, real estate attorney and author of New York Mortgage Foreclosures, an annually-revised, three-tome, 3,000-plus-paged resource.
“In a stable or increasing market, the professionals who buy at foreclosure sales know the value, the upkeep for the period of time for which they’ll hold it, they know the cost of renovating,” said Bergman, a partner in the Garden City-based law firm of Berkman, Henoch, Peterson and Peddy. “They can make a reasonable decision to preserve their profits.
“If the market is declining and you can’t predict the decline, it’s hard to make a reasonable, business decision. If you don’t know how to make a profit because you don’t know where the value is going, then you don’t invest.”
This means banks and other lenders who have seized back the homes, often after two-years or longer process, are saddled with growing inventories they must pay to maintain while they wait for real estate agents and auctions to find buyers.
For-sale listings of foreclosures for broker Mike Carroll has increased many fold since the market began slowing early last year. He now has 40 to 60 foreclosure listings.
“We haven’t seen this amount of foreclosures probably since 1993,” said Carroll, who has three Re/Max Best offices on Long Island and also works as an auctioneer of foreclosed homes.
In the early ’90s, the economy went south, leading to high rates of defaults, foreclosures and short sales, in which lenders agree to be “shorted” in a sale just to get inventory off the rolls.
Carroll has been selling homes for 20 years. The recent spate of foreclosures — called REO or “real-estate owned” in industry circles — has changed the landscape of his work in just two years.
“There’s a lot of paperwork that’s involved with foreclosure properties,” the broker said.
“I implemented a new computer program to keep up with the flow of properties. Two years ago, I was handling all the REO myself with one clerical. Now I’ve got four clerical and I’ve got six agents working on REO, counting me.”
Copyright © 2007, Newsday, Melville, N.Y.
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