Tuesday, December 26, 2006

"There Is A Tsunami Coming": Colorado

The Denver Post reports from Colorado. "A crew of nine movers swarms over a Lakewood townhome, quickly clearing out three floors and piling the contents in the alley. Luke Beuthel, a field inspector with a property management company called Mercury Alliance, opens drawers in the kitchen one by one, snapping digital photos to show they are empty."

"Nearby, locksmith Bill Grasmick hurries to replace a deadbolt on the front door. In under an hour, the house is emptied and physical control gained by Wells Fargo, holder of the delinquent mortgage. 'There is no packing involved,' says mover Art Fields. 'This is one-way: easy and quick.'"

"For most of 2006, Colorado has had the highest foreclosure rate in the country, a grim tally of mortgage defaults behind which lie thousands of stories of personal heartache. But money can be made even from misery, and this year, profits from foreclosures have soared."

"There are lawyers who initiate foreclosures, property managers who oversee troubled homes, service providers who maintain them and listing agents and auctioneers who sell them. There are also investors who buy and flip the foreclosed properties and Realtors who specialize in 'short sales,' or selling a home before it is lost in foreclosure."

"This Lakewood eviction generates about $1,000 for Field's moving crew and the locksmith. The property management firm won't get paid until it sells the house, but then it will reap 2.2 percent of the home's resale price, roughly $3,600. Others will take bites of the foreclosure profits as well. About 1 percent, or $1,650, will go to Premiere Asset Services, Wells Fargo's property management arm. The Realtor who provides a buyer will get about 2.8 percent, or $4,620."

"Tom Di Mercurio, owner of Denver- based Mercury Alliance, makes no apologies for his line of work. 'There is an entire cottage industry around the foreclosure business,' said Di Mercurio, who has managed thousands of lender-owned properties in a 35-year career. Mercury Alliance's business is up 150 percent this year, he said."

"The work is time-consuming and the margins slimmer than conventional real estate sales. Watching over empty homes for months isn't easy work."

"Di Mercurio said he has seen it all: Homes abandoned with unfinished meals on the table; a home swept clean and the key and an apology note placed neatly on the table; most frequently, homes left in utter disrepair."

"Some angry former owners have stripped properties of appliances, cabinets, even light fixtures. More vindictive owners have been known to plug drains with concrete and turn on the water. Vandals and vagrants will target abandoned homes."

"But with more than 18,000 foreclosures expected this year - a record for the metro area, servicing foreclosures is where the action is in real estate these days. The sooner foreclosed homes are resold and occupied by people who will care for them, the better for nearby home owners and for the metro area's ailing real estate market, Di Mercurio said."

"Metro Denver has the largest concentration of third-party REO property managers of any city, a legacy of a real estate downturn, and a wave of foreclosures, that accompanied the oil bust of the late 1980s. The current foreclosure epidemic traces more to overbuilding and aggressive lending than to fundamental economic problems, but the industry spawned by the earlier deluge of defaults is coming on strong."

"'We are hiring like crazy. We expect to get busier in 2007,' said David McCarthy, president and chief executive of Integrated Asset Services, one of the country's largest independent REO property managers. The firm of 116 workers has hired 42 people this year and plans to add another 30 in the first quarter of 2007. The number of foreclosed homes it has sold has jumped from about 3,000 last year to 4,000 this year."

"Head counts are up about 25 percent at Fidelity National Asset Management Solutions, another big REO property management firm, president Chad Neel said. Fidelity Solutions sells about 1,000 foreclosed properties a month, a pace about 40 percent ahead of last year, he said."

"'I am turning away business,' Neel said. 'Every client we have says there is a tsunami coming.'"

"When REO property managers can't sell a home, they call on auctioneers like Dallas-based Hudson & Marshall. Co-owner David Webb was in Denver just before Thanksgiving, auctioning 90 homes in a ballroom sale. Webb plans to be back in late February with another batch of homes."

"As more foreclosures flood the market and the inventory of unsold homes rises, auctions will increasingly become an important way to match buyers and sellers. 'They are telling us Colorado is very heavily hit and we will be active here for the next year and a half,' Webb said."


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