Housing Auctions Surge as Foreclosures Mount
ROBERT SIEGEL, host:
As the home mortgage meltdown spreads, foreclosure auctions, like the one Chris Arnold took us to, are becoming big events. Who's buying?
NPR's Cheryl Corley went to find out.
CHERYL CORLEY: Chicago is just like the rest of the country. Mortgage defaults are on the rise. And if a homeowner can't find the money to bring the mortgage up to date or find someone to buy the home, more than likely, the property will end up on an auction list.
Mr. FRED LAPPE (Auctioneer): If you get your cell phones off, ladies and gentlemen. We're going to get started. We're going to conduct a number of sales today for cash. In order to bid, you have to have with you a cashier's check or certified check for 10 percent of your bid.
CORLEY: The weekday auctions at the private auction firm Intercounty Judicial Sales are not a noisy affair. Fred Lappe(ph) has been running this type of auction for nearly 20 years, and he methodically reads off the Chicagoan suburban properties the courts have ruled must now be sold.
Mr. LAPPE: The plaintiff is bidding for this parcel $242,432.41. Anybody else? Sold.
CORLEY: The plaintiff in this case is the lender, which often starts the bid at a discount in hopes of spurring some competitive wagering. The potential buyers at this auction are regulars, speculators who travel almost pack-like from each of the foreclosure auctions that are held throughout the day.
Attorney and realtor Tom Jacobs attends many of them.
Mr. TOM JACOBS (Attorney; Realtor): This is not a business for the fainthearted. There's no title policy, there's no survey. You don't see the inside of the property. I've bought over a hundred properties and never saw the inside of one. You have to have a tremendous amount of confidence and cash to do this. And nobody cries if we get burned. And we do.
UNIDENTIFIED MALE: 07CH11137 at 2245 South Tromboling(ph), Chicago. Plaintiff's bid is $161,500, exactly.
CORLEY: This week, there are about 700 properties up for public auction in Cook County, nearly double the number of last year's weekly average. Starting bids range from $41,000 for a suburban condo to more than a half million for a Chicago home. Nobody bids on any of the properties, and Fred Lappe says that's not a surprise.
Mr. LAPPE: Purchasing at a foreclosure auction today is probably much less of a deal than it was a year ago or two years ago, because previously, with credit standards being fairly loose, an investor who bought a property to foreclosure sale stood a pretty good chance of finding a qualified buyer to sell the property to. Today, that pool of buyers has diminished.
CORLEY: Because credit is tight. And many of the types of loans that fueled the foreclosure crisis are no longer available. So anybody who buys at an action may have to hold on to property longer. That doesn't bother Mary Richardson, the CEO of Personal Investment Corporation. She has bought 20 properties, a few of them at auctions.
Ms. MARY RICHARDSON (CEO, Personal Investment Corporation): My husband and I do rentals. We do the rentals, put a tenant in, and the last 10 that we put in was actually a foreclosed owner who needed to go someplace.
CORLEY: Richardson tracks foreclosures and tries to work with owners before their property gets to the auction block. She says it's important for anyone interested in buying foreclosed property to make sure it's free of any lien. She says, while business is good, this is not a get-rich-quick scheme.
Ms. RICHARDSON: A lot of new people come in and they come in based upon infomercials. They come in based upon huge workshops that they've done over the weekends. But if I can't stress anything, do your homework before you come in and sit down at an auction.
CORLEY: In a sandwich shop downstairs from Intercounty's auction room, Richard Gregory(ph) says learning is exactly what he's trying to do. Already a real estate broker, he's learning the ins and outs of foreclosure auctions from Richardson.
Mr. RICHARD GREGORY (Real Estate Broker): I want to make some money. And right now, there's an abundance of foreclosures. So I figured, (unintelligible) some type of people in the world, to find an opportunity or a calamity out of an opportunity. I want to find some opportunity out of a calamity. And so right now, we're in a calamity situation. So I got to find an opportunity out of it.
CORLEY: Gregory says he knows that he's trying to profit from someone else's misfortunes. But if he doesn't buy these houses, someone else will.
Cheryl Corley, NPR News, Chicago.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.