Foreclosure Bus Tour

cjcj

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Latest real-estate fad: Hunting for foreclosure deals

Catherine Reagor
The Arizona Republic
Mar. 29, 2008 12:00 AM
During the housing boom, investors flocked to metro Phoenix and climbed onto buses that took them to the Valley's fringes, where they checked out affordable new homes they could buy low and sell high.

Now, the bus tours to those edge suburbs are starting again. But this time, home buyers are looking for foreclosure properties they can flip for a fast profit.

The Valley's foreclosure-buying spree started with auctions last fall. Late-night infomercials turned from buying homes with little down to foreclosure-investing. Daylong foreclosure-investing seminars in Valley hotel conference rooms, including sessions held by Trump University, began filling up in January. Smaller bus tours put on by local real-estate agents are going on most weekends now, and a national group called Foreclosure Bus Tours today will hold its first daylong event in the Phoenix area.


"Foreclosure-investing is the real-estate buzzword now," said Eric Brown, a former Phoenix home builder who is a managing director of real-estate consulting firm Robert Charles Lesser & Co. "Huge investment companies and individuals are looking to pick up properties cheap."

Foreclosure Bus Tours has shuttled investors around Detroit, Fort Lauderdale, Fla., and Boston, and it has tours planned in Dallas and Houston as well as Maryland and Connecticut. For $97, investors get lunch and check out several foreclosure properties. Usually, a local real-estate agent and mortgage broker is on the bus to get deals going.

"There's a lot of interest in Arizona foreclosures," said Rodney Townsend, who started Foreclosure Bus Tours in Detroit with partner Ralph Claxton. He said a man and his sister from Boston are flying to Phoenix for this weekend's tour to try to find a home for their mother.

Foreclosures on rise

Last month, 2,500 homes in metro Phoenix were foreclosed on, the highest monthly tally since the real-estate recession of 1990.

"I don't see foreclosures peaking in metro Phoenix until after the second quarter this year," said analyst Tom Ruff of Information Market.

A big auction held in Sun City earlier this month marketed almost 400 foreclosure properties in the Valley. Most sold at bargain prices.

Jim Sexton, president of the Phoenix-based real-estate firm John Hall & Associates, said more real buyers who are ready to make deals are going to foreclosure auctions now instead of watching curiously.

One bidder at the auction, Saul Grotstein of Los Angeles, said there was more competition for the properties than he expected. He is partnering with some other investors buying two foreclosure homes in the southwest Valley.

"We aren't done buying in Phoenix," said Grotstein, who was heading to Florida for another foreclosure auction. "There are going to be more deals as the foreclosure inventory grows."

There is some concern that novice investors will get in over their heads aske many did during the boom of 2004-05.

"Last time around, it was the amateurs who believed the infomercials and used all the home equity in their own homes to buy rental properties," said Jay Butler, director of Realty Studies in the Morrison School at Arizona State University Polytechnic.

"Now, many of those houses are in foreclosure and selling to a similar group of investors."

Townsend said his group works with real-estate agents to counsel potential foreclosure buyers so they are ready. Foreclosures have always been popular investments in metro Phoenix, but in the past, most buyers bid on them at trustee-sale auctions on the Maricopa County Courthouse steps. Most investors did their homework and checked out the house and how much was owed on it before the auction.

But now, most Valley homes in foreclosure don't have any equity left because of falling home values. More than 95 percent of the houses going into foreclosure are going back to the lender because no one wants to bid on the houses with upside-down loans, which are worth less than what is owed on them.

Lenders are trying to sell them at other auctions or through real-estate agents for sometimes less than half of what they are owed.

Some homeowners are trying to avoid foreclosure by doing short sales. But Brett Barry of Realty Executives said many lenders aren't willing to negotiate, particularly on home-equity loans or second mortgages, and that is forcing more people into foreclosures.

Lenders won't deal

"Lenders just won't deal, and it makes no sense because it's only going to cost them more money, particularly when the houses are going for so cheap at auctions," Barry said.

Diane Drain, a Phoenix bankruptcy and foreclosure attorney, is seeing the same thing. She said she is working with two to three investors a day who are going to lose homes to foreclosure because lenders won't negotiate with them.

She cautions people investing in foreclosures to spend only money they can afford to lose.

"If it's money you would take to Vegas and drop on a table, then invest it in foreclosure properties," Drain said. "But if it's your retirement account or home equity, don't touch it. I am seeing too many people now who are losing everything because they invested in homes they thought they could flip for a profit."
 

Moosie

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When the markets GOOD.... It's GOOD... When it Sucks... It's GOOD , Thats why I like Realestate :D :D
 

IDHunters

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This will "fix" the mortgage crisis better than any gubmint program. Let the market adjust, let everyone who over spent or over lent take their hits and move on.

I know prices in Pocatello are started to come down, especially for duplex/fourplex type properties.
 

cjcj

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I agree, if the feds would just keep their ass out of it , then the natural cycle of "supply and demand" will even things out....real estate needs to be "stable"
 
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