Foreclosures account for a fifth of Duluth home sales

• Empty lot after foreclosure, fire

Neighbors chat Friday behind a vacant lot, formerly the site of a foreclosed home on the 1300 block of North 56th Avenue West in West Duluth. The home had been damaged by fire and was torn down by the city last fall. The foreclosure/bank sale share of home sales jumped from 8 percent in 2007 to 20 percent in 2009, according to the city of Duluth. (Lisa Baumann / lbaumann@duluthnews.com)

Talk about it

Foreclosed homes are making up a larger share of homes sold in Duluth.

According to the city of Duluth assessor’s office, foreclosure and bank sales of homes rose from about 8 percent in 2007 to 20 percent in 2009.

That growth is no surprise to Realtor Michelle Lyons, owner and broker at Port Cities Realty in Duluth. She specializes in foreclosures, and her office typically handles 80 to 90 foreclosure listings per month in the Twin Ports. Lyons now has 65 foreclosed homes listed and 18 foreclosed home sales pending.

Karen Pagel Guerndt, president of the Duluth Area Association of Realtors, said while the increase is significant, if the number is still at 20 percent in Duluth (more recent numbers were not immediately available), that’s better than most of the nation and the Twin Cities especially.

Nationwide in April, homes known as REO (real-estate owned, or those owned by banks) climbed to 35 percent of all sales, and in the Twin Cities half of all sales were foreclosures, according to Clear Capital, which puts out a monthly Home Data Index Market Report for major metro areas.

What does all this mean for homebuyers?

“It can be a great opportunity,” Guerndt said. “But there are some risks involved.”

Lyons has become adept at getting these homes sold and said only 1 percent of her sales never close. That’s significant because a foreclosure sale can get held up at the last minute.

“They are harder to close,” Lyons said. “Title issues can hold them up — if information is missing, for example.”

Guerdt had that happen last week. Her client purchased a foreclosed home, renovated it and sold it.

But instead of closing the deal last week, it was held up when a problem with the title was discovered.

“In this case, the bank that sold it to my client is going to do right, but I don’t know how long it’s going to take them,” she said.

In a regular sale with the seller present, missing information often can be cleared up quickly, Lyons said. In a foreclosure, the seller is gone and all kinds of issues can arise.

“That’s what keeps it interesting and is why I love it,” Lyons said. “I love to solve problems.”

One challenging foreclosure Lyons is handling involves a home at 1312 N. 56th Ave. W. She had been trying to call the seller to arrange a cash-for-keys deal, where the owner is offered money to move out within a certain time period. After having no luck by phone, Lyons went to the address and found the property, but no home. She learned there had been a fire that severely damaged it, and by the time she was asked to get involved, the city had torn it down and the owners were long gone.

“Sometimes homes fall through the cracks,” she said. “I know the neighbors were happy to have it torn down.”

Holly Henry is one of those neighbors. She bought her home last year because she liked the neighborhood and was undeterred by the vacant, fire-damaged home next door.

“I trusted the city would tear it down,” she said.

The site doesn’t meet current codes for building, so Lyons is now working with the bank to donate the land to Henry and the other adjacent neighbor.

Although the property didn’t deter Henry, foreclosed homes can bring negative impacts to a neighborhood.

“It’s true that if you have two very similar houses and one is foreclosed and one isn’t, it will bring the value down, because the bank is willing to sell it at a lower price,” Guerdt said.

Many foreclosed homes sit vacant for months and Lyons said currently she has the most foreclosures in the Denfeld and Lincoln Park neighborhoods. She and her team put a lot of effort into checking on the properties, maintaining the yards and making sure people aren’t squatting in them.

“I put my contact information on the houses and encourage neighbors to let me know what’s happening,” she said.

Lyons has evicted squatters and, although she said she has seen a lot when it comes to dealing with foreclosures, certain things can still throw her for a loop.

“It’s an emotional thing when people are getting ready to hand over the keys,” she said. “It pulls at your heartstrings and a lot of times there are tears. I always try to tell them that they are putting this portion (of their life behind them) and getting a fresh start.”

She’s also a member if the city’s Foreclosure Task Force, a group that has come up with ways to keep people informed about their options should they be faced with the possibility of foreclosure.

“I think it’s been a huge help,” Lyons said.

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