Picking a sale after foreclosure
With the rise of foreclosure filings comes the parallel rise in foreclosure auctions. Lisa Chow checks out the auction block in New York City and looks into whether or not it's worth it to buy.
Foreclosure sign (Joe Raedle/Getty Images)
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Doug Krizner: Foreclosure filings are on the rise across the country, even in one of the hottest real estate markets, New York City. From member station WNYC, Lisa Chow reports on whether this is a buying opportunity.
Lisa Chow: Foreclosed homes go up on the auction block almost every day in New York. Courtrooms holding the auctions are packed with investors, bank representatives and lawyers. The homeowners show up sometimes. Their curious neighbors do, too.
Elias Mulzac used to buy houses at the auctions in the hope of selling them at a profit. He says the auctions have become more of a spectacle than a place to buy bargain properties.
Elias Mulzac: Most of the properties are overpriced right now. The prices are too high. They are market values. There are no deals.
Mulzac says the banks base their prices on what's still owed on the mortgage. But over the last few years, homeowners have squeezed all the equity out of their properties. So the banks' prices are almost as high as the regular market rates.
Lisa Urban is a real-estate lawyer. She says lenders don't want to lose a cent.
Lisa Urban: They want to get the mortgage money out of the foreclosure, so they're not going to be letting the properties go -- at least they're not at this point letting the properties go for less than what the mortgage amount is.
When properties don't sell at auction, they revert back to the banks. Regular auction watchers say that happens about 90 percent of the time these days.
Because the New York's housing market still looks buoyant, banks are cleaning up the foreclosed properties and listing them for sale on the open market. But they don't really want to be in the business of selling homes -- it's expensive and time-consuming.
Michael Gregg owns and rents out 35 apartments. He bought most of them at foreclosure auctions in the 1990's. He believes foreclosure rates will keep rising, and that means auction prices will eventually fall.
Michael Gregg: I've been waiting about six, seven years now for this day to happen. I can see the writing on the wall. This is exactly how it was in the late 80's -- the debacle of the savings and loans. That's how I got my first co-ops.
It looks as though the foreclosure trend is going Gregg's way. Third-quarter foreclosures were up nearly 40 percent in the city from the same period year ago.
In New York, I'm Lisa Chow for Marketplace.
