In foreclosure crisis, some see opportunity
As home foreclosures mount, bargain hunters are emerging in the Twin Ports. "A lot of people have been calling, but there's still an awareness problem," said Jeff Vollman, a real estate agent. That's why Vollman said his real estate company, Edmu...
As home foreclosures mount, bargain hunters are emerging in the Twin Ports.
"A lot of people have been calling, but there's still an awareness problem," said Jeff Vollman, a real estate agent. That's why Vollman said his real estate company, Edmunds Co. LLP, has teamed with Countrywide Bank to organize bus tours of foreclosed properties now on the market.
Two such two-hour tours already have occurred, and another is slated to leave Aces, 3827 Oakes Ave. in Superior, at 1 p.m. Sunday.
The tours are the brainchild of Mike Locker, an employee of Countrywide Financial, a national mortgage lender. He also has put together bus tours of foreclosed properties in the Twin Cities metro area.
The tour is free to any prospective buyer prequalified by Countrywide. Buyers prequalified by other lenders will be charged $25 to participate in the tour of about one dozen homes, ranging in listed value from $50,000 to $250,000.
Locker stressed that the tours are intended to be educational, and participants are under no obligation to tender offers for any of the properties.
The local Multiple Listing Service doesn't track foreclosures, but Edmunds' agents estimate that 200 to 300 foreclosed homes are now in the pipeline to be sold in the Twin Ports area. That's 12 percent to 18 percent of the total residential listings in the region.
"We've never seen this many foreclosures in our lifetimes," said Darren Hansey, another agent.
Ron Edmunds said the last comparable period of time in the local housing market was the early 1980s, and even then the total volume of foreclosures was lower. Yet Edmunds said the market for properties remains healthier than it was in the 1980s -- a time of 20-plus percent interest rates.
"The question I always ask is: Are you still finding buyers? And the answer is: Yes, we are. If there are no buyers, that's when you should start packing it in," he said.
Baji Gill, an agent for Western Realty Co. in Duluth, said he believes the number of foreclosures in the Twin Ports market is near its crest right now and should subside in months to come.
Despite the influx of foreclosed properties onto the market, Gill said, "We are seeing multiple offers, and the inventory is moving."
He said would-be buyers should realize that while there are deals to be had, banks still expect to receive a fair price for foreclosed homes.
"Bad offers do not work," Gill said.
Monty Vareburg of Duluth purchased two foreclosed properties late last year. He purchased a home in Gary for $30,000 and sold it five months later for $50,000, after making no appreciable improvements, aside from cleaning up the property.
He used the proceeds to help remodel a home in Woodland he purchased for $135,000. He installed new carpet, laminate flooring, updated the kitchen and repaired compromised walls and ceilings. Today, the property has an assessed market value of $205,000.
Vareburg put the home on the market for $188,900 but has since dropped the price to $179,900.
In the face of a soft real estate market, Vareburg said he may be content to continue operating the residence as a rental property.
"The market is perfect to snap up properties, but buying them for resale right now is probably not a good idea," he said.
Vareburg said he has passed up other opportunities to purchase promising homes out of foreclosure lately because of concerns about the strength of the housing market.
For people who are buying homes for use as their primary residence, however, today's market environment may be more attractive.
Preston Modeen, 23, is in the midst of purchasing a Denfeld home from a bank that had foreclosed on it. A first-time homebuyer, he considers the $70,000 he plans to invest in the property a good deal and doubts he would have been able to afford a home in the neighborhood otherwise.
"It's really nice to be able to find something cheaper, especially with the prices of food and gas going up like they are," he said.
The purchase was not without some aggravations, however. Modeen had been scheduled to close on the property more than a month ago. He is required to have some plumbing, utilities and painting work completed before the Federal Housing Administration will approve his loan.
The improvements were ones that Modeen would have made to the property anyhow, but he said the idea of investing time and money in a home that does not yet belong to him makes him a bit uneasy.
"Some of the homes need help, and some are in move-in condition," said Chad Binsfield, owner of Binsfield Construction LLC, who has participated in several tours of foreclosed properties, serving as a consultant to prospective buyers.
Binsfield said often properties can be dramatically improved and made more valuable with a relatively small investment.
Work can quickly snowball, however, as James Tanski can attest. He purchased a four-bedroom Duluth home out of foreclosure a couple months ago, and is laying plans to remodel it, possibly for use as an adult foster-care facility.
"It seems the more you tear apart the walls, the more headaches you run into," he said, advising prospective buyers to "make a budget and then plan on spending a lot more."
Still, Tanski feels he got a good deal purchasing the property from a bank.
Monitoring foreclosed properties about to go on the market can be time-consuming.
"It's not unusual to watch a property for six months before it's listed by a bank," said real estate agent Terri Ristow. If a resident fights eviction, the process can be even lengthier.
"If you can work with a real estate agent who's experienced in dealing with foreclosures, it's a lot easier," Tanski said, adding, "I don't advise anyone who's green to get into the foreclosure market."
Reflecting on his own road to homeownership, Modeen said: "It can be a frustrating process, but I figure it's worth it."
PETER PASSI covers business and development. He can be reached weekdays at (218) 279-5526 or by e-mail at firstname.lastname@example.org .