The Foreclosure Report

Ohio Pros Offer Advice

The Toledo Blade reports from Ohio. "With foreclosures soaring across northwest Ohio and southeast Michigan, Toledo real estate investor Matt Dewood has plenty of prospects, and not just ramshackle places in older areas of Toledo. 'There's a ton of opportunities out there,' said Mr. Dewood."

"He and other pros offer advice to prospective buyers on how to find and snag foreclosed homes, known as REOs, or real estate owned by the lender."

"But first, the experts dispelled a myth. Sheriff's auctions of foreclosed properties aren't the happy hunting grounds many would-be buyers believe. Odds are good that the successful bidder in the Toledo area will be the bank or other lender holding the mortgage on the property."

"To protect their interest, lenders typically submit opening bids for the loan balance. Home values didn't rise in this region as much as they did in some other areas of the nation during the long housing boom. So, unless the homeowner has built up significant equity, these properties seldom represent the kind of deals auction participants are seeking."

"Mortgage-holders get subsequent sales proceeds before other creditors. Although there are exceptions to this rule (such as abandoned properties sold for delinquent taxes), the greatest opportunity for prospective individual buyers begins after the lender has taken deed to the property and put it up for sale."

"Lucas County records show buyers are landing deals. A newer McMansion - four bedrooms, five baths, nearly 5,000 square feet - in the upscale Country Walk development in Sylvania Township was appraised at $575,000 for a sheriff's sale a year ago."

"It was acquired by the lender and was resold seven months later for $315,000, or $260,000 below the appraisal, according to the Lucas County auditor's office."

"A three-bedroom bungalow in Toledo's Point Place section was appraised at $86,000 for a foreclosure sale a year ago, bought by the bank, and resold in January to a couple for $38,000, county records show."

"A 1948 brick two-story near Toledo's Ottawa Park sold for $50,000 in a foreclosure sale. Lucas County lists the home's value for tax purposes at $114,200."

"One in 60 houses in the Toledo area was in foreclosure last year, ranking the city 30th worst among the nation's largest cities, said RealtyTrac Inc., of Irvine, Calif. In Lucas County alone in 2006, 2,573 properties were sold at involuntary auctions for $95.3 million, according to the sheriff's office."

"Fifth Third bank, like other lenders, tries to work with borrowers who miss house payments to prevent an involuntary sale. Homeowners unable to right their financial ships used to be able to turn the keys over to the bank and walk away. But now, policies at Fifth Third and most other lending institutions require the house be taken formally through foreclosure."

"In such situations, the lender files suit against the homeowner in state court, known in Ohio as Common Pleas court. If a judge rules in favor of the bank, the house is to be sold at a regularly scheduled auction overseen by the county sheriff's staff."

"Banks try to avoid foreclosures. In Lucas County, the process takes at least nine months and is costly, not only legal expenses before the sale, but also costs afterward including heating and lawn-mowing. Once Fifth Third takes possession of a house, it lists it with an outside agent. These lists typically are the most valuable sources for bargain-hunters, industry experts said."

"Fifth Third doesn't post a list of properties in branches or on the Internet. But it maintains a list internally and provides information to interested customers."

"National City Bank, which is a top mortgage lender in the region, delivers most deeds to Fannie Mae and other secondary lenders after successful foreclosures. Its mortgage unit operates a Web site, ncmcreo.com, listing remaining properties for sale."

"Each lending institution handles REO properties differently. Some sell houses on which mortgages are in default en masse at steep discounts to firms that specialize in the resale of these properties, experts said."

"A number of Internet sites, some of which charge a fee, provide listings of REO houses. The site reotrans.com listed 33 Toledo properties last week. Ocwen.com, operated by Ocwen Financial Corp., West Palm Beach, Fla., lists hundreds of homes recovered by the Veterans' Administration and other lenders."

"Unlike at sheriffs' auctions, however, prospective buyers don't bid against lenders. Sixteen northwest Ohio homes will be on the block at a sale scheduled for 7 p.m. Wednesday at the Holiday Inn French Quarter in Perrysburg. The properties are listed on the firm's Internet site, hudsonandmarshall.com."

"As a rule of thumb, agents who specialize in these properties say the longer an REO property is for sale, the better the potential deal for a buyer. 'Lenders aren't in the property ownership business; they're in the money business,' said Rod Culler. He is a specialist in foreclosed homes, and nearly all of the 80 to 100 homes he handles at any given time are REO properties."

"Unlike conventional sellers who can accept whatever their pocketbooks permit, banks must follow guidelines. Those guidelines loosen as the listing becomes 'seasoned,' Mr. Culler said."

"Because homes are sold 'as is,' he urges buyers to pay for professional inspections. Bank sellers are typically unwilling to lend to the new buyer, sales agents said."

"Agents who specialize in these properties warn prospective buyers that transactions sometimes get delayed because of a backlog of foreclosed homes awaiting final processing at the sheriff's office."

"Foreclosure specialist Linda Drews, of Loss Realty, Toledo, encourages prospective buyers not to get their hopes up too high. 'So many people have taken these classes that teach them they can buy for pennies on the dollar,' she said. 'From where I stand, that doesn't work. We'll have a home listed at $90,000 and someone will write an offer for $45,000. The seller isn't going to take it.'"

"She quickly added, however: 'There are deals to be had mainly because there are so many properties.'"

"Many REO homes are purchased by investors, noted agent Ray Doster, a foreclosure specialist at ReMax Preferred Associates, Toledo. Often, these are cash sales. Bank sellers usually adjust the price of a home every 30 days. On a property that hasn't sold after six months, 'somebody is probably looking at a pretty good price,' Mr. Doster said."

posted by Ben Jones @ 12:17 PM