This article first appeared in the St. Louis Beacon, March 23, 2009 - For some foreclosed homes, rebirth can begin in a glitzy hotel ballroom where they're SOLD! to the highest bidder during a high-energy auction that speed-sells mansion-wannabes in one breath and modest two-bedroom frame houses in the next.
REDC, an Irvine, Calif., company that holds foreclosure auctions across the nation, stopped in St. Louis Saturday on a five-day widely publicized blitz through Illinois, Indiana, Kentucky and Missouri. It's a traveling road show, packing a tuxedoed auctioneer and arm-waving bid "spotters" who auctioned 84 lender-owned houses in one sitting at the downtown Millennium Hotel.
To be sure, some investors were among the several hundred bidders who packed the ballroom, but at least two-thirds of the crowd raised their hands when the auctioneer asked how many were attending their first real-estate auction. Though most left without a buy, others nabbed the houses they came for.
Doug Hartmann, a Collinsville Realtor, bought a four-bedroom, 5,020 square-foot luxury brick home set on two wooded lots in the Collinsville bluffs. His winning bid was about $100,000 under the most recent asking price of $359,000 -- which had already been drastically slashed from the $400,000s.
"That's a $600,000 house,'' Hartmann said, while taking a quick break from the auction. He intends to live in the home.
LaQuana Dilworth was also smiling after being named high bidder on a 1,176-square-foot, three-bedroom ranch in Jennings. She successfully bid $4,000 for the home that had been marketed for $14,900. It was foreclosed on in July for $64,000.
"I'm really excited,'' said Dilworth, a mother of two, who said she pays $800 a month now to rent in the same neighborhood. Her children won't have to switch schools, and she said her granddad and brothers have promised to help her remodel the home.
Just as foreclosures have cut across all demographics, the homes on the auction bloc varied in size, age, price and location. Bidding on the Collinsville property started at $159,000; bidding on the home in Jennings, at $500.
That's 68 down, and thousands of foreclosures to go
Sixty-eight homes were sold Saturday, according to Rick Weinberg, a public relations spokesman for REDC. While most of those sales are subject to approval by the lenders that currently own the properties, Weinberg put the average acceptance rate at 85 to 90 percent. REDC stands for Real Estate Disposition Corp.
Even if all the sales are accepted, REDC's one-day power auction is just a drop in the foreclosure bucket. In Missouri, about 16,053 foreclosure properties are currently available for sale, according to RealtyTrac, which tracks foreclosure statistics. In Illinois, the number is more than 102,000, and nationally, the total exceeds 1.7 million.
The glut of these so-called "distressed properties" not only drives down housing prices, in general, but also sales and construction of new homes. According to figures released Monday by the National Association of Realtors, the national median price for an existing home continued its downward slide in February to $165,400 -- a drop of 15.5 percent from $195,800 in February 2008.
While sales of existing homes showed an increase nationally in February -- up 5.1 percent from January -- about 45 percent of those sales were foreclosures and short sales, sold at discounted prices.
First-time buyers shopping for bargains accounted for half of the nation's home sales last month, according to Lawrence Yun, chief economist of the national association.
"Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price,'' Yun said in a statement.
First-time buyers are vital to jumpstarting the housing market -- and that, in turn, is key to lifting the economy out of recession, say economists.
Carole Baras, a RE/MAX agent who is president of the St. Louis Association of Realtors, said the arrival of spring has brought some positive signs.
"The St. Louis market has not been hit as hard as several other markets in major cities, and also we did not have the extreme [price] highs that those cities were supposedly enjoying previously,'' Baras said. "Our market did go up, and we have been hit, but we are going to see a little bit of a turn, or at least a leveling off -- and we are definitely seeing the first-time homebuyers starting to come out because of the $8,000 [tax credit] stimulus.
Spring always presents itself with some renewed energy and hope. And I think we will be seeing a leveling off and a little hike in home sales and the showing of properties.''
Baras said that increased sales won't necessarily translate to a spike in the median price of homes being sold. Although foreclosures account for about 12 percent of the St. Louis market, she believes, the ceilings on FHA loans -- about $280,000 in St. Louis -- will also keep sales of higher priced homes down.
"The majority of our sales today are FHA sales; we're seeing more younger people, first-time home buyers. So, therefore, that lower-price-range home is going to be a lot more appealing to them,'' she said.
Baras said an increasing number of sales would allow current owners to "trade up" into larger or more expensive homes.
The American Dream reborn?
"You'll regret it tomorrow,'' the auctioneer would prod at the foreclosure auction, hoping to nudge the bidding up by a thousand dollars or two or three in a rapid-fire cadence that zoomed forward faster than a driver at a NASCAR race.
The spotters waved their arms wildly when a new bidder jumped in to the fracas -- an exciting twist for homes that have been vacant for months.
Baras said that in many cases, the properties have been listed by local agents who will see some compensation from the sale, though not their normal commission. She said the auctions appeal to real-estate investors and can be a good way to get "stale stuff" off the market. On the other hand, she warns that individual home buyers should educate themselves carefully to make sure they know the property they are buying.
Although bidders may think they are getting "a deal," it is possible that they could end up paying more than the current asking price.
Pat Austin, of Alexander Realty, said it would be worth the prospective buyers' time to check with the listing agent. She watched a home on Finney Avenue in St Louis that was listed for $15,000 sell for $17,000.
"That was a success story for the lender,'' she said.
Even after houses sold, buyers were urged to stick around for a while in case the deal didn't go through -- perhaps, a bidder would fail to produce the required $5,000 cashier's check or couldn't arrange financing from lenders available on the spot. A 5 percent buyer's premium was added to winning bids.
Some would-be bidders, such as Leonard Reynolds of Florissant, said that several properties he wanted to bid on were pulled before the auction started and that others weren't open for inspection, although the auction company advertised "open house'' dates.
Weinberg acknowledged that the open houses have been "an ongoing challenge that we're trying hard to correct'' but added that 90 percent of the homes are open for inspection. He said the company contacts the real-estate agents and brokers assigned by the banks and lenders to remind them that they are responsible for being at the open houses during the inspection periods.
In a statement, Jeffrey Frieden, CEO of the auction company, said that while foreclosures are "troubling,'' low interest rates and highly motivated sellers -- in this case the lenders -- have created a "perfect storm" for homebuyers.
"We turn houses back into homes,'' Frieden said. "When a house is vacant, everyone loses. When we put a family into a home, they're paying a mortgage, property taxes, gas, electric and water bill, and hiring landscapers, painters and electricians. All that moves the economy forward. A vacant home moves it backward, leading to the deterioration of the neighborhood."
And that was the attitude of most bidders Saturday.
Scott and Andrea Marshall, with their two little boys in tow, left the auction after the price of a Florissant home they were interested in quickly jumped beyond their bidding ceiling. The family recently relocated from Richmond, Va., to Florissant, where Scott Marshall is pastor of Trinity Church of the Nazarene.
Andrea Marshall called the auction a learning experience and said that she had thought about the foreclosure when she was looking into the property.
"I definitely thought about that; I wondered about the circumstances,'' she said.
Scott Marshall pointed out that "life is reality and you have to deal with what is.''
"You can look for blame, or you can move forward and create something new -- otherwise you are churning in the past," he said.
Homes sold
Feb. 2009 : 223 in St. Louis, 686 in St. Louis County
Feb. 2008 : 267 in St. Louis, 836 in St. Louis County
Median Prices
Feb. 2009 : $68,500 in St. Louis, $112,250 in St. Louis County
Feb. 2008 : $83,500 in St. Louis, $134,900 in St. Louis County
Source: St. Louis Association of Realtors
Foreclosures
New foreclosure filings in February
(January numbers are in parenthesis)
Missouri: 3,129 (2,469 in January)
- St. Louis County: 1,058 (720)
- St. Louis City: 440 (575)
- St. Charles County: 222 (178)
- Jefferson County: 142 (139)
Illinois: 14,218 (14,447)
- St. Clair County: 221 (218)
- Madison County: 202 (138)
Source: RealtyTrac
