the leading online marketplace for foreclosure properties, today released its Year-End 2010 U.S. Foreclosure Market Report™, which shows a total of 3,825,637 foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on a record 2,871,891 U.S. properties in 2010, an increase of nearly 2 percent from 2009 and an increase of 23 percent from 2008. The report also shows that 2.23 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 2.21 percent in 2009, 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.
Foreclosure filings were reported on 257,747 U.S. properties in December, a decrease of nearly 2 percent from the previous month and down 26 percent from December 2009 — the biggest annual drop in foreclosure activity since RealtyTrac began publishing its foreclosure report in January 2005 and giving December the lowest monthly total since June 2008.
December Default notices (NOD, LIS) decreased 4 percent from the previous month and were down 35 percent from December 2009; Scheduled foreclosure auctions (NTS, NFS) decreased 3 percent from the previous month and were down 20 percent from December 2009; and bank repossessions (REO) increased nearly 4 percent from the previous month — thanks in part to substantial month-over-month increases in some states such as Nevada (71 percent increase), Arizona (52 percent increase) and California (47 percent increase) — but were still down 24 percent from December 2009.
Foreclosure filings were reported on 799,064 U.S. properties in the fourth quarter, a 14 percent decrease from the previous quarter and an 8 percent decrease from the fourth quarter of 2009. The fourth quarter total was the lowest quarterly total since Q4 2008.
“Total properties receiving foreclosure filings would have easily exceeded 3 million in 2010 had it not been for the fourth quarter drop in foreclosure activity — triggered primarily by the continuing controversy surrounding foreclosure documentation and procedures that prompted many major lenders to temporarily halt some foreclosure proceedings,” said James J. Saccacio, chief executive officer of RealtyTrac. “Even so, 2010 foreclosure activity still hit a record high for our report, and many of the foreclosure proceedings that were stopped in late 2010 — which we estimate may be as high as a quarter million — will likely be re-started and add to the numbers in early 2011.”
Nevada, Arizona, Florida post top state foreclosure rates
More than 9 percent of Nevada housing units (one in 11) received at least one foreclosure filing in 2010, giving it the nation’s highest state foreclosure rate for the fourth consecutive year despite a 5 percent decrease in foreclosure activity from 2009. Nevada foreclosure activity in December increased 18 percent from the previous month and was up 14 percent from December 2009. Fourth quarter foreclosure activity in Nevada decreased nearly 7 percent from the previous quarter but increased 19 percent from the fourth quarter of 2009.
Arizona registered the nation’s second highest state foreclosure rate for the second year in a row, with 5.73 percent of its housing units (one in 17) receiving at least one foreclosure filing in 2010, and Florida registered the nation’s third highest foreclosure rate, with 5.51 percent of its housing units (one in 18) receiving at least one foreclosure filing during the year.
Other states with 2010 foreclosure rates ranking among the nation’s 10 highest were California (4.08 percent), Utah (3.44 percent), Georgia (3.25 percent), Michigan (3.00 percent), Idaho (2.98 percent), Illinois (2.87 percent), and Colorado (2.51 percent).
California, Florida, Arizona, Illinois and Michigan account for half of national total
Five states accounted for 51 percent of the nation’s total foreclosure activity in 2010: California, Florida, Arizona, Illinois and Michigan. Together these five states documented nearly 1.5 million properties receiving a foreclosure filing during the year despite annual decreases in the three states with the most foreclosure activity.
A total of 546,669 California properties received a foreclosure filing in 2010, a decrease of nearly 14 percent from 2009 but still the largest state total. After hitting a two-year low in November, California foreclosure activity rebounded nearly 15 percent higher in December but was still down 18 percent from December 2009.
Florida posted the nation’s second biggest total in 2010, with 485,286 properties receiving a foreclosure filing — a 6 percent decrease from 2009. Florida foreclosure activity in December hit the lowest monthly level since July 2007, down 22 percent from the previous month and down nearly 54 percent from December 2009.
A total of 155,878 Arizona properties received a foreclosure filing in 2010, a 4 percent decrease from 2009 but the third biggest state total for the third straight year. Arizona foreclosure activity in December jumped nearly 31 percent higher from a 32-month low in November, but was still down nearly 33 percent from December 2009.
Illinois posted the fourth biggest state total, with 151,304 properties receiving a foreclosure filing in 2010, and Michigan posted the fifth biggest state total, with 135,874 properties receiving a foreclosure filing during the year. Foreclosure activity in both states increased about 15 percent from 2009.
Other states with 2010 totals among the 10 biggest in the country were Georgia (130,966), Texas (118,923), Ohio (108,160), Nevada (106,160), and New Jersey (64,808).
Report methodology
The RealtyTrac Year-End U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing entered into the RealtyTrac database during the year. Some foreclosure filings entered into the database during the year may have been recorded in the previous year. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac’s report incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). For the annual and quarterly reports, if more than one foreclosure document is received for a property during the year or quarter, only the most recent filing is counted in the report. The annual, quarterly and monthly reports all check if the same type of document was filed against a property previously. If so, and if that previous filing occurred within the estimated foreclosure timeframe for the state where the property is located, the report does not count the property in the current year, quarter or month.
U.S. Foreclosure Market Data for Top 10 States - 2010
Rate Rank State Name Total Properties with FC Filings %Housing Units 1/every X HU %Change from 2009 %Change from 2008
--
U.S.
2,871,891 2.23 45 1.67 23.23
1
Nevada
106,160 9.42 11 -5.30 36.64
2
Arizona
155,878 5.73 17 -4.49 33.33
3
Florida
485,286 5.51 18 -6.08 25.95
4
California
546,669 4.08 25 -13.58 4.40
5
Utah
32,520 3.44 29 19.82 119.20
6
Georgia
130,966 3.25 31 23.42 53.62
7
Michigan
135,874 3.00 33 14.85 28.11
8
Idaho
19,088 2.98 34 11.23 124.25
9
Illinois
151,304 2.87 35 15.38 52.08
10
Colorado
54,041 2.51 40 6.98 7.23
U.S. Foreclosure Market Data for Top 10 States - Q4 2010
Properties with Foreclosure Filings
Rate Rank State Name NOD LIS NTS NFS REO Total 1/every X HU (rate) %Change from Q3 10 %Change from Q4 09
--
U.S.
104,172 132,175 244,324 88,552 229,841 799,064 162 -14.12 -8.08
1
Nevada
13,910 0 13,901 0 7,969 35,780 31 -6.89 19.05
2
Arizona
55 0 27,132 0 12,792 39,979 68 -18.58 -12.14
3
California
73,072 0 67,789 0 33,924 174,785 77 -8.50 -15.35
4
Florida
0 43,643 0 35,244 31,478 110,365 80 -29.72 -23.09
5
Utah
3,634 0 3,567 0 3,217 10,418 91 -2.66 17.36
6
Georgia
0 0 27,666 0 11,239 38,905 103 -5.64 27.25
7
Michigan
9,122 0 17,139 0 15,278 41,539 109 -9.89 0.55
8
Idaho
1,616 0 2,901 0 1,127 5,644 114 -23.98 -23.06
9
Illinois
0 24,273 0 8,457 8,853 41,583 127 -13.01 -13.36
10
Colorado
53 0 10,352 0 5,315 15,720 137 -3.65 6.92
U.S. Foreclosure Market Data for Top 10 States - Dec 2010
Properties with Foreclosure Filings
Rate Rank State Name NOD LIS NTS NFS REO Total 1/every X HU (rate) %Change from Nov 10 %Change from Dec 09
--
U.S.
36,935 38,783 88,483 23,699 69,847 257,747 501 -1.75 -26.26
1
Nevada
4,767 0 5,683 0 3,022 13,472 84 18.48 14.42
2
Arizona
10 0 9,174 0 4,377 13,561 201 30.60 -32.70
3
California
24,389 0 29,481 0 12,045 65,915 203 14.88 -18.11
4
Michigan
5,039 0 6,890 0 4,132 16,061 282 4.90 -20.25
5
Utah
1,294 0 1,090 0 947 3,331 284 -22.15 -27.87
6
Idaho
624 0 993 0 459 2,076 309 -2.67 -47.73
7
Florida
0 10,848 0 7,334 7,459 25,641 343 -22.15 -53.64
8
Georgia
0 0 8,295 0 2,747 11,042 365 -23.44 -14.90
9
Illinois
0 9,134 0 2,131 2,777 14,042 376 8.51 -21.20
10
Colorado
28 0 3,512 0 1,583 5,123 420 3.08 -14.74
Friday, February 11, 2011
Finding gold in them thar foreclosures
GILBERT, Ariz. — If we're going to search for gold in the wreckage of the mortgage crisis, then 6:57 a.m. in front of 1009 W. Juanita Ave. is as good a time and place as any to start.
The Cooper Ranch subdivision, 25 minutes from downtown Phoenix, is just beginning to stir. But when Casey Doran pulls up to his first foreclosure of the day, the tan stucco house has already seen a steady trickle of visitors.
"Still occupied," he says, nodding to a green tag hanging from the meter by the garage, proof someone's paying the electric bill. He leans on the bell, then tries the door. The house resists his advances, leaving Doran squinting into the darkness behind the blinds.
Three hours from now, the intelligence gathered in these 10 minutes of reconnaissance will be put to the test. That's when 1009 W. Juanita and nearly 600 homes like it are scheduled for the auction block.
Maybe, with bidding set to open at $105,000, this house is a bargain.
Or maybe it's a mistake, waiting to drag an investor under.
Either way, there's little time to ponder this 1,631-square-foot gamble. But there will certainly be other chances.
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After all, 50,000 homes clog the county's foreclosure pipeline, with more added every day. But before you jump to buy, know that you'll have plenty of company.
At the top of the boom, speculators swarmed cities like Phoenix, buying up houses largely with borrowed cash. Those who didn't sell in time were stung when the market collapsed. Now investors — many buying with their own cash — are back. Since last year, the share of homes bought by investors at daily auctions has multiplied more than fivefold.
"These are unique times. Very, very unique times," says Tom Ruff of The Information Market, which analyzes Valley real estate data. "I think the best way to describe it is the Wild West."
The scene unsettles some, wary that investors could dump homes if the market weakens or take advantage of buyers or renters. Others are troubled at banks' willingness to settle at auction rather than give more substantial concessions to struggling homeowners. But something's got to be done with all these overmortgaged, underappreciated houses.
"The investors are a tool to help get those properties moved into new hands," says Diane Drain, a Phoenix bankruptcy attorney and real estate trustee. "At this point, the dam is so broken. How do you stop the flow? I don't know how you do it other than one little stick at a time."
Crowd gathers
During the boom, Steve Vadas sold title insurance on thousands of homes. Now, with business dried up, he's back at the job that gave him his start — in the shadow of the Maricopa County Courthouse, auctioning foreclosures.
In the old days, Vadas stood on the steps reading lists of homes aloud and alone, eyed like a crazy man by the occasional passer-by.
"Nobody would bid," he says. "I literally was reading them to the air."
No more. On a May afternoon, a crowd of 60 churns the plaza outside the courthouse doors. Bidders in board shorts and wraparound shades scan pages-long printouts and talk furtively into headsets to unseen investors. Five auctioneers compete for their attention.
Even in good times, some homeowners failed to pay their mortgages. But in a steady economy, auctions were largely formalities. With few bidders, most foreclosures were claimed by the bank holding the loan.
Then, home prices here plunged by half. Debt-saddled homeowners started abandoning houses in the dark. Lenders who never intended to get into real estate ended up holding the keys.
In the last year, they've done what any merchant would do to avoid taking delivery of unwanted inventory: Slash prices. No guarantees. No refunds.
Advertise | AdChoices
"It's capitalism at its finest — or at its worst," Vadas says.
Stories circulate of buyers who realized too late they'd bought a second loan, when the first loan holder gets the house. Or of investors who bought only to find the tenant had taken cabinets, toilets, even the pipes.
"You can tell all the newbies," says Randy Lewis of bidding service 3rd Party Buyer LLC, scanning the crowd. "They're all up at the front, but not bidding."
But plenty have jumped in, posting the required $10,000 cashier's check and trying to leverage insider knowledge and a tolerance for risk. The result is what Lewis calls "chaos by statute," that begins as soon as opening bids are posted for the following morning's sales.
Deal chasers
"You've heard of storm chasers?" he says. "We're deal chasers."
On to the third house of Doran's morning: 1508 E. Weathervane Lane. Opening bid: $130,100.
A competitor exits the gate just as Doran, who scouts homes for bidding service Posted Properties.com, pulls up. "It's vacant," he says. "You can go inside."
Just past the pool — veined with cracks from standing empty under the desert sun (note to investor: could cost $5,000 to repair) — the sliding door yields easily. The place is empty of life except for a moldy loaf of raisin bread in the refrigerator.
Doran takes a few notes about this house, bought in December 2006 for $300,000. On the way out, he runs into a woman from next door. She tells him the former residents have been "stealing" fixtures out of the house for the past month.
"Hopefully soon we'll have a new neighbor," she says.
By mid-2008, Trish Don Francesco was ready to try the Phoenix housing market again.
Her company, Metropolitan Marketing & Management, had spent the boom assembling portfolios of houses for wealthy investors. In 2004, she urged clients to sell, believing prices had peaked. Instead, most held tight as values crested, then plunged.
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But seeing homes for less than $100,000, she was intrigued. On a Saturday that August, Don Francesco drove to the Camelback Inn for an auction of houses.
"It was like being in a candy store," says daughter Makayla Don Francesco, also a broker. Houses were going for as little as $55,000. In a few hours, Metropolitan snapped up 17.
"I said to myself either the world is coming to an end or we're going to be really, really rich. I don't know which," Trish Don Francesco recalls.
She's bought 350 homes since, spending a few thousand dollars to fix and rent them, often to families who surrendered a previous home to foreclosure. Over the next year, she plans to increase that stake to 1,500 houses, buying on behalf of investors seeking a steady return from rents.
Information and cash
But investors are not the only players in this game, which trades in information as much as cash.
It begins each weekday afternoon, when trustees post opening bids for as many as 1,000 houses and property runners like Doran zigzag across the Valley inspecting the merchandise. They report back to companies like Posted Properties, which charge a fee to buy at auction.
Others work for wholesalers, who buy and flip to investors, often within hours, for a quick profit. Still other homes are bought by fix-and-flippers, who renovate and resell for a short-term gain.
When a family buys a house, it's all about emotion. But courthouse bidders trade bets with seeming disinterest. When the price goes too high, they walk away.
Unspoken, though, is the X factor drawing investors: the edginess of the gamble and the pursuit of a deal. Doug Hopkins, Posted Properties' CEO, recalls the morning he tagged along with a friend for his first trustee's sale 11 years ago.
"I remember coming out of there and calling my dad and I said, 'My life just changed.'"
Doran isn't sure what to make of today's fifth house: 6233 S. Parkside Drive. Opening bid: $67,000.
Fresh oil stains
Fresh oil stains the carport floor. A package sits unclaimed on the step.
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It's an open secret in Phoenix foreclosure investing that, facing a door that won't budge, some runners drill the lock. Doran's real estate license lets him key in to some houses. But at Parkside, the back door slides open. He steps into the kitchen.
"I'm always afraid I'm going to find a dead body in one of these," Doran says, reaching for the refrigerator handle.
Not yet. But he has found cats and a puppy floating in abandoned pools. At an empty house in Chandler, he found an Alaskan husky, very much alive, left behind with a bag of dog food.
At this stop, though, the biggest complication is the house's size — just two bedrooms and one bath, limiting its appeal.
"Somebody will buy it ... for a rental," he says.
During the boom, borrowing was quick and easy. But buying at auction demands payment by the next day. Forget about a bank loan.
That's where Scott Gould comes in.
At 8:40 a.m. on a Wednesday, Gould tilts back in a black office chair, waiting for two phones and a Blackberry to ring so he can put his money to work. In shorts and running shoes, he looks more like the gymnast he once was than a banker. On the wall hangs a gift from his wife — a "loan shark" assembled from Monopoly money.
Hard money lender
Gould is a "hard money" lender, by some account's the valley's busiest. Last year he loaned investors cash to buy 1,300 homes at 18 percent annual interest. Call Gould for a loan and the answer comes back in 20 minutes, once his staff reviews sales of comparable homes.
"The most important thing at the end is, do we think the guy can make money," he says.
The phone rings. A fix-and-flip investor asks Gould for his opinion about a house in Mesa.
"The inside, from what we could see, looked good. It smelled good," the man says.
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Gould, skeptical, counsels bidding $1 over the asking price and no more.
The phone rings again.
"Good morning, Brad. I got a check sitting here hot for you," Gould says.
This morning, though, is slow, with just three new loans. But a few miles away, a new round of sales keeps Makayla Don Francesco's ear to the phone.
When bidding begin, Metropolitan staffers lose out on two targeted houses and in the chaos, miss two more. But at a 10 a.m. sale, Don Francesco grabs a house for $72,300, before discovering it has two bedrooms and a den, limiting its rental appeal. Then she snags another in Buckeye for $66,000, although unsure if it has three or four bedrooms.
"There's a lot of risk and you are playing with somebody else's money," Don Francesco says. "Some days it is terrifying."
But then she reminds herself that the deals may last for only so long.
It's almost noon and this is Doran's 10th and final stop: 2701 Val Vista Drive. Opening bid: $387,600.
"Odd as hell"
"Holy moly," he says, pulling in. The house is very big. So are the mounds of trash in the overgrown yard. He knocks on the back door, then the front. Not a sound. But the place is unlocked. Doran rolls his eyes and steps inside.
"Somebody's still living here," he says, walking past dishes in the sink. "This is odd as hell."
At the living room, he tilts his head. Music floats up from downstairs — and men's voices. Doran takes one last picture, then moves quickly toward the door.
"Not worth getting shot over, I can tell you that," he says.
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By Thursday, workmen have ripped out the ceiling in the house on Weathervane Doran checked out two mornings ago. And in a kitchen in Scottsdale, Neil Lende, a real estate agent who invests in houses given up for lost, is deciding where to begin.
The house, bought Tuesday and paid for Wednesday with a hard money loan, has a "popcorn" ceiling that will have to go. The pool is so green with algae it might as well be bottomless. In a valley full of foreclosures, what makes this a singular opportunity?
It's clear only when Lende opens another door in the Paradise Manor subdivision, 10 minutes away.
"When we first came to this one, this stuff was growing all the way out to here," project manager Charlie Sugarman says, pointing to shrubs that blocked the door. Inside, Lende found the kitchen plastered with coffee grounds.
Now, it's repainted in silver sage. The cabinets, refinished in cream, snuggle against stainless steel appliances.
Lende paid $194,651 for the house, then spent $35,000 to renovate. Tomorrow it goes to closing, sold to New Jersey retirees. For two months work — and risk — he'll pocket a $40,000 profit.
But while the new owners know they're buying a foreclosure, they almost certainly don't realize the pipeline it has traveled.
"I don't think they can envision it how it used to be, which is good," Lende says. "Because this is the reality now."
The Cooper Ranch subdivision, 25 minutes from downtown Phoenix, is just beginning to stir. But when Casey Doran pulls up to his first foreclosure of the day, the tan stucco house has already seen a steady trickle of visitors.
"Still occupied," he says, nodding to a green tag hanging from the meter by the garage, proof someone's paying the electric bill. He leans on the bell, then tries the door. The house resists his advances, leaving Doran squinting into the darkness behind the blinds.
Three hours from now, the intelligence gathered in these 10 minutes of reconnaissance will be put to the test. That's when 1009 W. Juanita and nearly 600 homes like it are scheduled for the auction block.
Maybe, with bidding set to open at $105,000, this house is a bargain.
Or maybe it's a mistake, waiting to drag an investor under.
Either way, there's little time to ponder this 1,631-square-foot gamble. But there will certainly be other chances.
Advertise | AdChoices
After all, 50,000 homes clog the county's foreclosure pipeline, with more added every day. But before you jump to buy, know that you'll have plenty of company.
At the top of the boom, speculators swarmed cities like Phoenix, buying up houses largely with borrowed cash. Those who didn't sell in time were stung when the market collapsed. Now investors — many buying with their own cash — are back. Since last year, the share of homes bought by investors at daily auctions has multiplied more than fivefold.
"These are unique times. Very, very unique times," says Tom Ruff of The Information Market, which analyzes Valley real estate data. "I think the best way to describe it is the Wild West."
The scene unsettles some, wary that investors could dump homes if the market weakens or take advantage of buyers or renters. Others are troubled at banks' willingness to settle at auction rather than give more substantial concessions to struggling homeowners. But something's got to be done with all these overmortgaged, underappreciated houses.
"The investors are a tool to help get those properties moved into new hands," says Diane Drain, a Phoenix bankruptcy attorney and real estate trustee. "At this point, the dam is so broken. How do you stop the flow? I don't know how you do it other than one little stick at a time."
Crowd gathers
During the boom, Steve Vadas sold title insurance on thousands of homes. Now, with business dried up, he's back at the job that gave him his start — in the shadow of the Maricopa County Courthouse, auctioning foreclosures.
In the old days, Vadas stood on the steps reading lists of homes aloud and alone, eyed like a crazy man by the occasional passer-by.
"Nobody would bid," he says. "I literally was reading them to the air."
No more. On a May afternoon, a crowd of 60 churns the plaza outside the courthouse doors. Bidders in board shorts and wraparound shades scan pages-long printouts and talk furtively into headsets to unseen investors. Five auctioneers compete for their attention.
Even in good times, some homeowners failed to pay their mortgages. But in a steady economy, auctions were largely formalities. With few bidders, most foreclosures were claimed by the bank holding the loan.
Then, home prices here plunged by half. Debt-saddled homeowners started abandoning houses in the dark. Lenders who never intended to get into real estate ended up holding the keys.
In the last year, they've done what any merchant would do to avoid taking delivery of unwanted inventory: Slash prices. No guarantees. No refunds.
Advertise | AdChoices
"It's capitalism at its finest — or at its worst," Vadas says.
Stories circulate of buyers who realized too late they'd bought a second loan, when the first loan holder gets the house. Or of investors who bought only to find the tenant had taken cabinets, toilets, even the pipes.
"You can tell all the newbies," says Randy Lewis of bidding service 3rd Party Buyer LLC, scanning the crowd. "They're all up at the front, but not bidding."
But plenty have jumped in, posting the required $10,000 cashier's check and trying to leverage insider knowledge and a tolerance for risk. The result is what Lewis calls "chaos by statute," that begins as soon as opening bids are posted for the following morning's sales.
Deal chasers
"You've heard of storm chasers?" he says. "We're deal chasers."
On to the third house of Doran's morning: 1508 E. Weathervane Lane. Opening bid: $130,100.
A competitor exits the gate just as Doran, who scouts homes for bidding service Posted Properties.com, pulls up. "It's vacant," he says. "You can go inside."
Just past the pool — veined with cracks from standing empty under the desert sun (note to investor: could cost $5,000 to repair) — the sliding door yields easily. The place is empty of life except for a moldy loaf of raisin bread in the refrigerator.
Doran takes a few notes about this house, bought in December 2006 for $300,000. On the way out, he runs into a woman from next door. She tells him the former residents have been "stealing" fixtures out of the house for the past month.
"Hopefully soon we'll have a new neighbor," she says.
By mid-2008, Trish Don Francesco was ready to try the Phoenix housing market again.
Her company, Metropolitan Marketing & Management, had spent the boom assembling portfolios of houses for wealthy investors. In 2004, she urged clients to sell, believing prices had peaked. Instead, most held tight as values crested, then plunged.
Advertise | AdChoices
But seeing homes for less than $100,000, she was intrigued. On a Saturday that August, Don Francesco drove to the Camelback Inn for an auction of houses.
"It was like being in a candy store," says daughter Makayla Don Francesco, also a broker. Houses were going for as little as $55,000. In a few hours, Metropolitan snapped up 17.
"I said to myself either the world is coming to an end or we're going to be really, really rich. I don't know which," Trish Don Francesco recalls.
She's bought 350 homes since, spending a few thousand dollars to fix and rent them, often to families who surrendered a previous home to foreclosure. Over the next year, she plans to increase that stake to 1,500 houses, buying on behalf of investors seeking a steady return from rents.
Information and cash
But investors are not the only players in this game, which trades in information as much as cash.
It begins each weekday afternoon, when trustees post opening bids for as many as 1,000 houses and property runners like Doran zigzag across the Valley inspecting the merchandise. They report back to companies like Posted Properties, which charge a fee to buy at auction.
Others work for wholesalers, who buy and flip to investors, often within hours, for a quick profit. Still other homes are bought by fix-and-flippers, who renovate and resell for a short-term gain.
When a family buys a house, it's all about emotion. But courthouse bidders trade bets with seeming disinterest. When the price goes too high, they walk away.
Unspoken, though, is the X factor drawing investors: the edginess of the gamble and the pursuit of a deal. Doug Hopkins, Posted Properties' CEO, recalls the morning he tagged along with a friend for his first trustee's sale 11 years ago.
"I remember coming out of there and calling my dad and I said, 'My life just changed.'"
Doran isn't sure what to make of today's fifth house: 6233 S. Parkside Drive. Opening bid: $67,000.
Fresh oil stains
Fresh oil stains the carport floor. A package sits unclaimed on the step.
Advertise | AdChoices
It's an open secret in Phoenix foreclosure investing that, facing a door that won't budge, some runners drill the lock. Doran's real estate license lets him key in to some houses. But at Parkside, the back door slides open. He steps into the kitchen.
"I'm always afraid I'm going to find a dead body in one of these," Doran says, reaching for the refrigerator handle.
Not yet. But he has found cats and a puppy floating in abandoned pools. At an empty house in Chandler, he found an Alaskan husky, very much alive, left behind with a bag of dog food.
At this stop, though, the biggest complication is the house's size — just two bedrooms and one bath, limiting its appeal.
"Somebody will buy it ... for a rental," he says.
During the boom, borrowing was quick and easy. But buying at auction demands payment by the next day. Forget about a bank loan.
That's where Scott Gould comes in.
At 8:40 a.m. on a Wednesday, Gould tilts back in a black office chair, waiting for two phones and a Blackberry to ring so he can put his money to work. In shorts and running shoes, he looks more like the gymnast he once was than a banker. On the wall hangs a gift from his wife — a "loan shark" assembled from Monopoly money.
Hard money lender
Gould is a "hard money" lender, by some account's the valley's busiest. Last year he loaned investors cash to buy 1,300 homes at 18 percent annual interest. Call Gould for a loan and the answer comes back in 20 minutes, once his staff reviews sales of comparable homes.
"The most important thing at the end is, do we think the guy can make money," he says.
The phone rings. A fix-and-flip investor asks Gould for his opinion about a house in Mesa.
"The inside, from what we could see, looked good. It smelled good," the man says.
Advertise | AdChoices
Gould, skeptical, counsels bidding $1 over the asking price and no more.
The phone rings again.
"Good morning, Brad. I got a check sitting here hot for you," Gould says.
This morning, though, is slow, with just three new loans. But a few miles away, a new round of sales keeps Makayla Don Francesco's ear to the phone.
When bidding begin, Metropolitan staffers lose out on two targeted houses and in the chaos, miss two more. But at a 10 a.m. sale, Don Francesco grabs a house for $72,300, before discovering it has two bedrooms and a den, limiting its rental appeal. Then she snags another in Buckeye for $66,000, although unsure if it has three or four bedrooms.
"There's a lot of risk and you are playing with somebody else's money," Don Francesco says. "Some days it is terrifying."
But then she reminds herself that the deals may last for only so long.
It's almost noon and this is Doran's 10th and final stop: 2701 Val Vista Drive. Opening bid: $387,600.
"Odd as hell"
"Holy moly," he says, pulling in. The house is very big. So are the mounds of trash in the overgrown yard. He knocks on the back door, then the front. Not a sound. But the place is unlocked. Doran rolls his eyes and steps inside.
"Somebody's still living here," he says, walking past dishes in the sink. "This is odd as hell."
At the living room, he tilts his head. Music floats up from downstairs — and men's voices. Doran takes one last picture, then moves quickly toward the door.
"Not worth getting shot over, I can tell you that," he says.
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By Thursday, workmen have ripped out the ceiling in the house on Weathervane Doran checked out two mornings ago. And in a kitchen in Scottsdale, Neil Lende, a real estate agent who invests in houses given up for lost, is deciding where to begin.
The house, bought Tuesday and paid for Wednesday with a hard money loan, has a "popcorn" ceiling that will have to go. The pool is so green with algae it might as well be bottomless. In a valley full of foreclosures, what makes this a singular opportunity?
It's clear only when Lende opens another door in the Paradise Manor subdivision, 10 minutes away.
"When we first came to this one, this stuff was growing all the way out to here," project manager Charlie Sugarman says, pointing to shrubs that blocked the door. Inside, Lende found the kitchen plastered with coffee grounds.
Now, it's repainted in silver sage. The cabinets, refinished in cream, snuggle against stainless steel appliances.
Lende paid $194,651 for the house, then spent $35,000 to renovate. Tomorrow it goes to closing, sold to New Jersey retirees. For two months work — and risk — he'll pocket a $40,000 profit.
But while the new owners know they're buying a foreclosure, they almost certainly don't realize the pipeline it has traveled.
"I don't think they can envision it how it used to be, which is good," Lende says. "Because this is the reality now."
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