LITHONIA, Ga.—On a muggy morning earlier this month, Paul Fuhrman pried the screen off a window to get into a two-story house in this Atlanta suburb.
It was just another day’s work for the 43-year-old executive at private-equity firm Colony Capital LLC, based in Santa Monica, Calif. After buying the house for $120,000 in a foreclosure auction, Mr. Furhman and his colleagues wanted to check out Colony’s new investment—and broke in because they hadn’t gotten the keys yet.
Mr. Fuhrman’s sweat and dirty hands show how the business of buying foreclosed homes, renovating and renting them out is morphing from a largely mom-and-pop business into the next big thing on Wall Street. Investors who once chased only big-ticket deals now are buying houses one at a time.
“We went from hunting elephants to whacking ants with a mallet,” says Mr. Fuhrman, who found stained carpets, piles of discarded clothing, a broken door and signs of a recent living-room camp out by squatters.
Colony owns about 3,600 foreclosed homes, including 133 bought in the Atlanta area in one day, and officials hope to increase the firm’s inventory to 10,000 by next spring.
At first, many investors hoped lenders would sell foreclosed houses in bulk. But most banks prefer to sell one house at a time, figuring that approach will fetch higher prices.
As a result, the foreclosure circuit hasn’t yet produced a giant windfall for buyers like Colony, though executives say early returns are promising. Yields on rents from houses owned by the firm are 7% to 8%, higher than many other types of real estate. Purchase prices have averaged 12% less than Colony expected, which should make it easier to sell the homes or borrow against them and exit with double-digit percentage gains.
Bulk investors are willing to pay up to 95% of value for Fannie properties in Florida? All we hear is that foreclosures sell for 20% to 30% off – but rarely do you see actual evidence. Hat tip to Daniel for posting this, from thelatimes.com:
A San Diego real estate investment firm has won an auction of nearly 700 homes owned by Fannie Mae in Florida, part of a government initiative to sell vacant and distressed properties to investors.
Pacifica Companies, which describes itself on its website as a “privately held, vertically integrated real estate developer, owner, investor and investment manager” was announced as the winner of the auction by the Federal Housing Finance Agency, regulator for Fannie Mae and Freddie Mac.
The firm paid $78.1 million, or close to 96% of the properties’ estimated worth.
Nearly 2,500 properties up for sale by Fannie Mae have been split up into eight geographic pools, and winning bidders are required to rent out the homes for at least three years.
The sale is a pilot program by the agency, intended to help clear the large numbers of foreclosed homes on the books of the two mortgage giants without crashing the housing market’s recovery.
Several hedge funds and other big investment groups backed with Wall Street money have lined up to bid on the homes. These big investors view a lucrative market for foreclosed homes converted to rental properties.
But groups associated with real estate agents, particularly the California Assn. of Realtors, have objected to the bulk sales of foreclosed homes to big firms, complaining that the housing market is actually suffering from a dearth of properties and could absorb more foreclosures.
Several Fannie Mae properties in the Inland Empire are up for bid. The winning bidders in other geographic areas will be announced in coming weeks, the federal housing agency said.
San Diego County is charged with the responsibility of disposing of properties owned by people who have died “intestate” – a question on every real estate licensee test!
The Public Administrator (PA) administers estates of persons who die with no will or without an appropriate person to act as an administrator; protects the decedent’s property from waste, loss or theft and ensures the estate is administered according to the decedent’s wishes.
I attended one of their auctions at the convention center a few years back – this year it is smaller (only ten properties) and being held at the county offices on Ruffin Rd. on May 16th at 3:00pm.
Three Northern California real estate investors agreed to plead guilty to forming a conspiracy to rig bids at foreclosure auctions, the Department of Justice Financial Fraud Enforcement Division said Thursday.
Charges were filed in the U.S. District Court for the Northern District of California against Barry Heisner of Brentwood, CA; Dominic Leung of Alameda, CA; and Hilton Wong of San Ramon, CA.
The Department of Justice says the three defendants conspired with others to obtain favorable auction selling prices by agreeing not to bid against each other in certain circumstances and by selecting a winning bidder for each auction item in advance. Authorities say the defendants carried out these activities at various real estate auctions, spanning from August 2008 to January 2011.
Authorities claim Heisner, Leung and Wong also committed mail fraud by fraudulently acquiring title to properties sold at public auctions and then by holding second, private auctions open only to members of the conspiracy. The properties selected were then given to the conspirators who submitted the highest bids.
Some of the violations related to the uncompetitive practices are breaches of the Sherman Act, which carry a maximum penalty of 10 years in prison and a $1 million fine. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine.
The FBI and the antitrust division have been working on California auction rigging cases for the past year. In October, two real estate investors pleaded guilty to bid rigging in the counties of Contra Costa and Alameda.
You’ve never seen a kitchen photo, have you? Hat tip to JS for sending this in, from theU-T:
A luxury bankruptcy home in La Jolla once featured in TV commercials has been sold for almost a third of its original asking price of $45 million, based on details from the property’s listing agent on Wednesday.
Beverly Hills-based Bob Hurwitz said “The Razor” property, considered by designers as an architectural marvel, has closed escrow. The buyer, an East Coaster, paid $14.1 million in cash, added Hurwitz, of the Hurwitz James Company. More details are expected to be released on Thursday.
Public records show about $34 million was spent building the 11,000-square-foot estate, which has never been occupied. Construction began in 2002 and was completed in 2008. The original sale price was set at $45 million but has consistently been slashed according to the market and even more when it became a bankruptcy property.
The Razor house, 9826 La Jolla Farms Road, was originally set to be sold at a Sept. 27 auction, but that was canceled because there were no qualified bidders.
The auction was then rescheduled to Nov. 10, with the starting bid shaved to $13.9 million from the $16 million set in September. The property again could not be sold because none of the bidders came close to what the bank would accept, at least $17 million, according to the listing company.
The oceanfront home is the bankruptcy estate of Jimmy Donald Cooksey Jr., according to public records. It is the work of San Diego-based architectural designer Wallace E. Cunningham, named one of Architectural Digest’s Top 100 Designers.
The United States government had more than two million reasons to celebrate Saturday.
A longtime Coral Gables resident designated $1 million and his historic home to the federal government in his will to help wipe away the nation’s $15 trillion public debt.
Uncle Sam put the home on 1248 Coral Way on the auction block Saturday.
The winning bid: $1.175 million.
The 1929, Spanish-style home belonged to James H. Davidson Jr., who lived in the home since his teenage days in 1938 and died childless last December at 87.
The home was officially designated a historic landmark in November by the Historic Preservation Board of Coral Gables.
The Miami-Dade property appraiser’s office values the two-story home that sits on four lots of land (double the size of most houses in the area) at just over $700,000.
The average list price for similar homes for sale in that area is $1.2 million, according to the real estate website Trulia.
“It’s incredible, the house really has remained untouched,” said Kelley Schild, a Coral Gables resident who came out Saturday to check out the house and see the auction.
The auction attracted about 100 people Saturday. Fifteen people registered to participate in the auction, which required them to turn in a $25,000 cashier’s check to the auctioneer that was promptly returned at the end of the auction.
George Richards—owner of the company that auctioned off the house, National Auction Co. — said the house was open to visitors all week and about 700 people went to scope it out.
He said he was thrilled with the turnout and conducted the auction in a traditional manner, speaking at what could only be discerned as 1,000 words per minute.
“Folks. you need to spend that money, it’s only money,” he reminded the bidders during the auction.
For many, the auction itself was a spectacle worth attending. “The auction fit the house, it was an antique way of bidding,” said Frank Chamoun, who placed the opening bid at $100,000.
Ultimately, the winning bid went to Barbara Perez, who kept a low profile throughout the auction and only starting placing bids once the auction participants dwindled down to two serious bidders. On top of the $1.175 million, she will also have to pay an additional 10 percent for auctioneer and broker fees.
“My heart has to stop racing and then I’ll be fine,” Perez said after her big purchase.
All they have to do is ditch the reserve price, and auctions would work great – have some guts! Hat tip to AL for sending this along from the wsj.com:
Last Friday, about 60 people gathered at a 10,300-square-foot French Chateau-style home in a gated community of this wealthy suburb of Los Angeles. Nibbling on fruit salad and croissants, the visitors meandered through the home’s large kitchen, checked out the view of the rolling hills or peeked into the movie theater with stadium seating while it played “Pretty in Pink.”
They had all gathered to see this seven-bedroom, seven-bath mansion, which was rented by singer Britney Spears between roughly 2008 and 2010, sell to the highest bidder. The home had previously been on the market for as much as $10.8 million; bidding would start at $4.5 million.
“I’m starting to get butterflies,” confessed Regina Leon, who owns the home with her husband Jose “Pancho” Leon, a builder and founder of a money-order company. After several of her girlfriends mentioned they were coming by, Ms. Leon had decided at the last minute to cancel her hair appointment to stay to watch the action unfold. Mr. Leon said he wasn’t worried, though he admitted he’d gotten only about four hours of sleep the night before.
Once considered a last resort for desperate sellers or for banks unloading foreclosed properties, home auctions are increasingly being used to sell penthouse apartments, waterfront mansions and grand country estates—many of them languishing in an uncertain market after significant price cuts. At Premiere Estates Auction Co., founded 10 years ago, the average price of a home the company auctions is up nearly 40% from a year or so ago, says auctioneer Anthony Fitzgerald. Gadsden, Ala.-based auction company JP King, in business since 1915, has seen inquiries for home auctions above $10 million so far this year double from a couple of years ago, said Craig King, the company’s president. In 2010, the company had 11 inquiries for homes above $10 million; so far this year it’s had 24.
As the housing slump drags on, the carrying costs of waiting out the market have become onerous, even for the wealthiest. A seller who put a home on the market in 2009 hoping that a turnaround was on the horizon may now be realizing that it could take several years or more for the market to rebound. Taxes on a $10 million or $20 million home can run into the hundreds of thousands of dollars a year, in addition to staffing, landscaping and other upkeep. The ultra high-end of the market is particularly vulnerable: As of September, houses priced at $10 million and above declined nearly 9.5% in value from last year, according to Zillow, the online housing tracker, compared to a 4.4% decline overall.
“Eventually, even the people who have unlimited means will throw in the towel at some point,” said George Graham, the CEO of Concierge Auctions.
Some brokers warn that when a well-known mansion or estate fails to sell at auction, it can become tarnished, making it harder to sell in the future. “If you have all that hype and then it doesn’t sell, then you’ve got egg on your face,” said Jeffrey Hyland, president of Beverly Hills-based real-estate firm Hilton & Hyland.
Bob Hurwitz, a longtime Southern California broker who recently tried unsuccessfully to auction off a $45 million sculptural-style home in La Jolla known as “the Razor,” said he’s concluded the process doesn’t benefit sellers, who assume all the risk by paying marketing fees up front. (Fees can range anywhere from a couple thousand dollars to upwards of $150,000 for ultra high-end homes.) He said auctions can also turn off potential buyers who don’t want to pay an additional 8% to 12% in premiums after the sale, which can amount to a million dollars or more for an expensive home. “It just doesn’t make sense,” he said. Laura Brady, of Concierge Auctions, said most buyers are aware that all real-estate transactions involve fees, and the premiums are included in auction-sale prices, “just like real estate agent’s fees” are in a traditional sale.
Mansions and estates are frequently auctioned for much less than their previous price tags, though those price tags may have been set unrealistically high to begin with. While both art-auction houses Christie’s and Sotheby’s are affiliated with real-estate companies, neither conducts real-estate auctions in the U.S. (Both have some affiliate agencies that have auction divisions which partner with companies like Concierge and Premiere Estates.)
Bob the listing agent and his staff have found us here, so I told him I’d try to help him rustle up a few more bidders for the next auction coming up Thursday. Tomorrow is the deadline to get in your $500,000 deposit to qualify to bid! From theU-T:
The auction date for “The Razor” house, a bankruptcy estate in La Jolla once featured in TV commercials, has been rescheduled for Nov. 10, according to the listing agent and recent court records.
The starting bid for the 11,000-square-foot home with private access to Black’s Beach also has changed, falling to $13.9 million from the $16 million set in September, documents show.The never-occupied home, at 9826 La Jolla Farms Road, is the bankruptcy estate of Jimmy Donald Cooksey Jr., according to the documents.
The original Sept. 27 auction was not held because “unfortunately, no bidders qualified for the auction,” the attorneys representing trustee Leslie T. Gladstone wrote. Listing agent Bob Hurwitz, who is based in Beverly Hills, said the real estate company came close with an overseas buyer but the funding could not be ironed out in time.
The terms for the newly set auction also have changed. Previous terms required bidders to wire in $500,000 to the trustee one week before the auction date. Now, interested buyers can demonstrate ability to close two days before the auction and bring a cashier’s check to the trustee in the amount of $500,000. The winning bidder would endorse the check over to the trustee.
The Nov. 10 auction will begin at 11 a.m. at 3580 Carmel Mountain Road, Suite 300 — the law offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., which is representing trustee Leslie T. Gladstone.
Court documents say the property, which was never finished by the former owner, will be sold free and clear of liens.
The home is the work of San Diego-based architectural designer Wallace E. Cunningham, named one of Architectural Digest’s Top 100 Designers.
About $34 million was spent building the estate, which was once featured in commercials for Calvin Klein and Visa. The original asking price was $45 million.
A ban on foreclosure auctions outside the downtown San Diego Superior Court has forced those who conduct them to two other areas that already host such transactions, a spokesman with a trade group that represents trustees said Monday.
The ban, made official in a July 1 court order, takes effect Tuesday.
People who “cry” trustee sales now conduct business at the entrance of the East County Regional Center, 250 E. Main St. in El Cajon, and outside 321 N. Nevada St., the address of Oceanside’s Housing Division offices, said Richard Meyers, executive director of the Irvine-based United Trustees Association.
It’s up to the individual companies that publish and post the sales to decide where to go, Meyers said.
The downtown San Diego venue had been used as an auction site since the 1960s. Over time, court officials said, dozens of investors, their representatives and onlookers routinely crowded around the main entrance of the downtown facility throughout the day, causing safety and security concerns.
A reader noted that yesterday was an active day for trustee sales. But unlike last month, when I got snookered into thinking something was afoot, I went right to the auction.com website.
Yep, yesterday they conducted their latest installment of ‘trustee sales by ballroom auction’ – link here.
I can relate to what they are going through. Bank of America and others are dumping some of their worst properties on them – only two of the 117 properties were over $400,000, and the majority were under $200,000. There was also plenty of postponements. Of the 117 on the list, only 30 were sold – they postponed 58, and cancelled 29.
If you are looking to pay cash for cheap properties, and don’t mind buying without title insurance and inspections plus evicting the occupants, this might be for you. At least the parking is easier, and you won’t be tripping over the bums and hobos downtown.
But it is run by the same REDC auction house that has been exposed here previously.
Overall yesterday there were 68 trustee sales conducted throughout the county, with 38 properties being purchased by 3rd parties, and 30 going back-to-bene. It brings October’s total up to 672 trustee sales, with three days to go. In September there were 754 successful trustee sales.
LITHONIA, Ga.—On a muggy morning earlier this month, Paul Fuhrman pried the screen off a window to get into a two-story house in this Atlanta suburb.
