Thursday, July 8, 2010

Richmonders Raise Their Hands and Hope for a Home

Listen to the full audio here.

Last week, a live auction of foreclosure properties was held at the Richmond Convention Center. The auction was part of a five city tour by the Real Estate Disposition Corporation. The REDC hit Boston, New York, Philadelphia, Richmond and Washington, D.C. in an effort to sell off lots of homes. After banks foreclose on a property, the REDC steps in to market and sell them. They say auctions like last week's spur the local and national economy.

According to the National Association of Realtors, home sales fell 2.2 percent in May. One-third of these sales were foreclosures or distressed properties, just what the REDC deals in. Many economists, predict sales will rise again, along with the employment rate, after a summer lull. In Executive Vice President of the REDC Walter Skrzynski address to auction crowd last week, he said:

"If the market continues for the next 100 years what it did for the last one hundred years, again, not a better time to buy folks.," Skrzynski said. "And lastly folks, you're buying properties at auction prices. You're buying at a price that you set. Folks, you're going to have a good time tonight. Sit back and enjoy yourself."

But chief U.S. economist Joseph Shapiro at MFR Inc., a global economic consulting firm, was quoted in the Richmond Times Dispatch June 23th as saying the May fall was “a worrisome sign," especially since federal tax incentives will stop at the end of September.

And according to some investors bidding at the auction on Tuesday, June 29th, the system itself can be disappointing. After winning an auction, either in person or on the REDC’s website, the bank then has to accept the offer. The REDC's Vice President of Public Relations Rick Weinberg said bidders are notified as soon as possible whether their bid takes.

"And most of the time they do," said Weinberg. "It's probably about 90 percent at this point because they have so much inventory that they need to get off their books, turning a non-performing asset into a performing asset. Because they're motivated, they're accepting more winning bids than ever before."

But investor George Berryman said it has taken him at least two weeks to find out the actual outcome of an auction. He is the owner of one property from a REDC auction, one he was completing paperwork on at the auction last week and one he lost after his bid wasn’t approved.

"I was a high bidder but obviously it was too low and they didn't accept it," Berryman said. "I don't know what they've done with the house but the long and short is it's all a toss up."

Weinberg said the properties often get put back into the auction system because high bidders don’t have the money to put down or the credit to get a loan.

"What originally happened to put us, this country in this mess, we avoid that at all costs," he said. "So we insure that the people who have the high bids do have the means to pay for these properties."

And Berryman isn’t arguing with the process, he said the REDC makes it clear in the packet you’re handed when you enter the auction that you can be disappointed. And he said he’s impressed with how smoothly the process works.

Mark Cawa of Norfolk was a bit more inflamed about the REDC. After the bank denied his winning bid last month, he returned to bid on the property again at last week's auction. He didn't win. But the high bidder that night won the property for two thousand dollars less than his denied bid.

"You know, you think you walked away with a 20 thousand dollar property and then they say no," Cawa said. "I mean, the one we did get was empty for a year and a half and we probably put another 15 or 20 grand into it. They're usually pretty beat by the time you get to them."

But the REDC insists bidders must do their homework. Weinberg said they are allowed to schedule a time to walk through the home, with their agents or anyone they'd like to bring, two weeks before the auction. And he said these auctions are helping put money back into the system. Owners begin paying a mortgage, property taxes and bills. Weinberg said if bidders are educated, the REDC provides an opportunity for them and the local economy.

"They actually start creating jobs by hiring painters, electricians, handy people, roofers and that all helps fuel they economy," he said.

REDC is has no shortage of complaints on online forums. Cawa admits he has relinquished a property in the past because he had only looked at the photo on the website. When he visited the location, he decided not to invest in it. Still, Cawa said the REDC has misled him and others.

"The one [listed] in Portsmouth didn't have any floors! I mean we looked in the window and it was just a shell," he said. "Her dad got one and we got there, everything looked good. Two weeks later their was a fire marshall sticker condemned sticker on it that wasn't on it when he bid it."

Weinberg admitted there have been complaints but he said customer service personnel go to bat for winning bidders and the REDC’s “as is” policy is clear on their website and at their auctions.

"There are always going to be some people that are going to be unhappy," he said. "And we do our best to smooth things over and do the right thing."

With Richmond's foreclosure rate the 17th highest in the U.S. at the beginning of this year, Richmonders will have plenty of opportunity to take a chance on a foreclosure.

-Caroline Jackson

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