Foreclosure snapshot: What are the pros picking?
| Friday, Oct 09 2009 12:35 PM
Last Updated Monday, Oct 12 2009 02:44 PM
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Alex Horvath / The Californian Field Service Agent Flor Loya announces and seeks bids on several foreclosed properties in Bakersfield and Kern County on the steps of Bakersfield City Hall.
Alex Horvath / The Californian Field Service Agent Kim Gilton seeks bids on several foreclosed properties in Bakersfield and Kern County on the front steps of Bakersfield City Hall Friday morning.
Alex Horvath / The Californian Miguel Soltero qualifies before he attempts to bid on a property during an auction in front of Bakersfield City Hall. He was the winning bidder of property auctioned by Field Service Agent Kim Gilton.
Casey Christie / The Californian This house at 12813 Stemple Drive was bought on City Hall steps for $208,000, back in 2005, it sold for $475,000.
Casey Christie / The Californian This house at 3300 Cosmic Drive just sold on City Hall steps for $132,000. Back in 2006, when it was new, a subsidiary of builder Corky McMillin Cos. sold it for $362,000.
Casey Christie / The Californian This house at 7604 Huachuca Court recently sold on City Hall steps for $107,500. It last sold in the summer of 2006 for $320,000.
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Bid wrong, lose money.
There is no safety net.
As local foreclosures continue at a healthy clip, an obscure daily ritual has become a competitive market for a few savvy investors.
Every weekday morning at 10, a group gathers on the steps of Bakersfield's City Hall for a public auction of foreclosing properties. It's here folks can pick up a defaulted house, condo or other property before it heads back to the bank.
Bidders are mostly real estate pros who know dangers lurk with each acquisition.
"You just never know," said Brigitte Strizak, an agent who operates Strizak Investments Inc. "It's a little bit like Las Vegas."
One house turned out to carry $36,000 in back taxes, a burden she was stuck paying off.
Liens are commonplace. Investors try to sniff them out ahead of time through title checks. Many participants arrive with laptops and cell phones, getting last-minute advice on a property's status. The auctioneer, too, is getting up-to-the second calls regarding delays and cancellations.
These days, about 200 items are on the sale list each morning. More than half of the sales are typically postponed as lenders and owners try to work out a deal. Would-be buyers must keep track of future auction dates on their own, and a sale can be postponed numerous times. You can only get such information here, when the auctioneer calls it into the open air, and bidders scribble notes on spreadsheet margins. After the initial public auction notice, the process enters a no-man's land of pen, paper and verbal announcements.
For winning bidders, the houses themselves almost always require work. Toilets, water heaters, even granite countertops have been torn out, messes left behind, foliage gone brown.
Some "properties" up for auction are even something of an illusion -- a second mortgage with no real value.
"If you buy a second accidentally, you just bought something that is probably worthless," said broker Frank St. Clair, who deals in foreclosure properties through Bella Vista Real Estate Holdings LLC.
Both Strizak and St. Clair prefer to fix up properties and sell them rather than maintain rentals.
The daily auction used to attract a small group of regulars. More show up now that the market has exploded.
Historically, Kern County saw about 1,500 to 2,500 foreclosures a year, county statistics going back to 1995 show.
Then the real estate bubble hit. Foreclosures dropped to a record low in 2005, when only 280 went on the block. Numbers crept back up in 2007.
Then came the unprecedented wave: 8,560 foreclosures in 2008.
So far, 2009 is continuing nearly apace. As of the end of September, nearly 5,860 foreclosures have been recorded.
That's about 14 percent fewer than the same nine-month period last year. But it doesn't necessarily mean the trend is over. Various foreclosure moratoriums have clouded the picture, and many defaulted homes now change hands through "short sales," when a lender agrees to sell a home for less than the amount owed on it.
Default notices, which are the first legal step in a possible foreclosure, are actually on pace to break last year's record, when more than 13,380 were filed.
Some 12,320 have been recorded in the first nine months of 2009 -- nearly 17 percent more than the same period last year.
Many will end up passing through the auction at City Hall.
If they're not bought by investors, they'll go back to lenders and reappear on the market as "real estate owned," or REO, properties. Some might wind up at one of the consumer-friendly, widely advertised auctions held occasionally at places like the Rabobank Arena.
Competition at City Hall, meanwhile, has intensified.
In the old days, you could usually snag what you wanted for a penny over the opening price.
Those days are over, St. Clair said.
"Many times, it is competitive bidding now," he said.
Strizak agreed.
"There are a lot of good investors out there," she said. "It's getting very hard."
Investors in action
A Californian survey of 26 foreclosed properties recorded in the metro Bakersfield area on a recent Tuesday found nine had been picked off at the City Hall auction. The rest went back to lenders.
Here's what the pros grabbed:
(Notes: Dollar amounts rounded. Property information from Kern County Assessor/Recorder's office. Assessed values are net taxable amounts as of Jan. 1. Amounts owed at time of auction often exceed original loan amount due to interest and fees.)
12183 Stemple Drive, 93312
Area: In the Villages of Brimhall tract, southeast of Allen and Brimhall roads
$208,000: price paid at public auction Sept. 15
$390,755: amount owed on defaulted loan
$228,863: county's assessed value
Buyer: Shae Mhalay, one of many companies managed by real estate broker Lance Ablin, a veteran buyer of foreclosed properties.
Specs: The 2,535-square foot home was built in 2004. It has six bedrooms and three baths.
History: In summer 2005, the house sold for $475,000. The buyer took out a $380,000 loan at the time; that loan defaulted in May this year. Two years later, a different lender put up another $34,560. Such seconds are typically a total loss when a property forecloses. The amount owed at auction time usually counts only the first loan, as in this case.
2506 Driller Ave., 93306
Area: Near Bakersfield College, northeast of Mount Vernon Avenue and Columbus Street
$91,000: price paid at public auction Sept. 11
$124,360: amount owed on defaulted loan
$142,938: county's assessed value
Buyer: Shae Mhalay company
Specs: The 1958-era house has three bedrooms, 1.75 baths and totals 1,735 square feet.
History: The home last sold in early 2005 for $104,000. In March that year, the previous owner borrowed $109,000 against it. That loan defaulted in April this year.
3300 Cosmic Drive, 93312
Area: Rosedale, southwest of Meacham Road and Jewetta Avenue, in McMillin Homes' Capella tract
$132,000: price paid at public auction Sept. 4
$306,350: amount owed on defaulted loan
$222,385: county's assessed value
Buyer: Strizak Investments Inc., a Bakersfield company run by real estate agent Brigitte Strizak
Specs: The 1,850-square-foot home, built in 2006, has three bedrooms and two baths.
History: In October 2006, the previous owner bought the brand-new house for $362,000. McMillin's lending arm made a first mortgage of $289,400 and a second of $54,260. The first defaulted in December 2008.
2813 Monterey St., 93306
Area: East Bakersfield, southwest of Niles and Oswell streets
$26,000: price paid at public auction Sept. 4
$117,150: amount owed on defaulted loan
$64,214: county's assessed value
Buyer: Goldberg Properties Inc., a Bakersfield company whose officers include Hector Casas. The company's Bernard Street address is also home to Casita Realty, City Terrace Mortgage and Krystal Finance Inc.
Specs: The 767-square-foot home was built in 1922. It has two bedrooms and one bath.
History: In January 2006, the previous buyer paid $135,000. A first loan of $108,000 defaulted in January this year. A piggyback second of $13,500 was also loaned at the time of purchase.
2205 Cedro Court Apt. D, 93309
Area: A condominium unit on the south side of Ming Avenue, east of Ashe Road
$16,000: price paid at public auction Sept. 10
$73,735: amount owed on defaulted loan
$22,000: county's assessed value
Buyer: Goldberg Properties Inc.
Specs: not available
History: The condo last foreclosed in summer 2002 and was picked up in December that year for $35,000. In August 2006, the owner borrowed $65,000 against the unit. That loan defaulted in April this year.
9009 Elizabeth Grove Court, 93312
Area: In the northwest RiverLakes Ranch community, northeast of Olive and Calloway drives
$216,000: price paid at public auction Sept. 21
$215,795: amount owed on defaulted loan
$271,414: county's assessed value
Buyer: Bakersfield investor Jim R. Ebling
Specs: The four bedroom, 2.5-bath home totals 2,570 square feet and has a swimming pool. It was built in 2003.
History: The previous buyers picked up the house new in summer 2003 from Centex Homes for $275,000, using a loan from the builder's mortgage arm for about $220,000. That's the loan that defaulted in January this year. There was another transaction that doesn't show up in the foreclosure process: a home equity loan totaling more than $200,000 made in fall 2006 by now-defunct Washington Mutual. That chunk was likely a total loss for WaMu.
7604 Huachuca Court, 93309
Area: The Laurelglen area northeast of Gosford Road and White Lane
$107,500: price paid at public auction Sept. 10
$364,000: amount owed on defaulted loan
$168,562: county's assessed value
Buyer: Bella Vista Real Estate Holdings LLC, a Bakersfield company managed by broker Frank St. Clair
Specs: The 1983-era house has three bedrooms and 2.5 baths covering 1,625 square feet. It also has a pool.
History: The home last sold in June 2006 for $320,000. A $297,500 mortgage taken out at the time defaulted in May this year.
911 Beryl Drive, 93304
Area: South Bakersfield, northeast of Planz Road and South H Street
$36,000: price paid at public auction Sept. 15
$256,500: amount owed on defaulted loan
$67,380: county's assessed value
Buyer: Bella Vista Real Estate Holdings
Specs: The three-bed, one-bath house totals 958 square feet. It was built in 1954.
History: The previous owner picked up the house in early 2002 for $68,000. In spring 2006, a $216,000 refi came through, then defaulted in May this year.
10201 Allene Way, 93312
Area: Rosedale, southwest of Calloway Drive and Hageman Road
$67,500: price paid at public auction Sept. 1
$194,070: amount owed on defaulted loan
$129,000: county's assessed value
Buyer: Spokane Investments LLC, a Florida company managed by Robert D. Johnston
Specs: The three-bedroom, 1.75-bath home, built in 1986, totals 1300 square feet
History: The home was gifted to the previous owner in fall 2000. In early 2005, the owner borrowed $175,000 against it. That loan defaulted in May this year.
