Foreclosure auctions no place for amateurs

Carolyn Said, Chronicle Staff Writer

Sunday, September 7, 2008

Bluetooth devices clamped to their ears and computer printouts in their hands, a dozen real estate investors clustered on the Alameda County Courthouse steps. Most wore hats and sunglasses against the brutal noontime sun. They were there for the day's foreclosure auctions, called trustee sales, the moment when houses cease belonging to the homeowner who fell behind on a mortgage.

These auctions are not for amateurs - buyers must pay on the spot in cash (or cashier's check), clear title is not guaranteed, there are no inspections and no cooling-off periods. Successful bidders often must evict the property's occupants, who may be the previous homeowners or renters.

The minimum bid on many properties is equal to what's owed on the mortgage - which generally exceeds the property value. But as the foreclosure crisis has mushroomed, many banks have begun dropping the minimum bid at the last minute, creating opportunities for the small cadre of investors who pay close attention and have the deep pockets and steel nerves to compete on this arcane turf.

"At the auctions, (many) properties' (minimum bid amounts) now are being dropped substantially. That's the best-kept secret," said Robert Kramer, an Oakland investor who buys both for himself and on behalf of clients who pay him a commission of 15 to 20 percent of their net equity in a property.

Increasing discounts

Statistics confirm that lenders are slashing prices at the trustee auctions and that more properties are being bought by investors - even though the vast majority still revert to lenders.

In August, 1,360 properties sold at California trustee sales were bought by investors, up from 432 in January, according to Discovery Bay's ForeclosureRadar.com, which tracks California foreclosures. But that represents just 4 percent of the 34,000 properties that went on the block. The other 96 percent reverted to the lenders.

"Discounts (at trustee sales) are an order of magnitude higher now than they were a year ago," said Sean O'Toole, ForeclosureRadar's founder and CEO. "We've gone from an average discount of around 3 percent in January 2007 to 38 percent on average in California in August." Of course, because many mortgages covered a home's full value, and values now have swooned, these lowered bids may simply bring prices in line with properties' current worth.

But some discounts are even steeper. O'Toole said one-third of the properties auctioned in August were discounted by 50 percent or more.

Kramer and other investors lie in wait to snap up these bargain properties - but finding them requires considerable persistence and diligence.

Kramer has two staffers who spend hours poring over computer records and then calling trustees or checking Web sites to find the minimum bids - usually determined just a couple of hours before the auction. The staffers also research properties' titles.

'A mad scramble'

If a property sounds promising and priced right, Kramer will hustle over to see it in person - although that's usually just a quick look from outside - contact his clients to see if anyone wants to bid and can come up with the money in time, and then rush to the courthouse steps.

"It's a mad scramble. You have to be ready to roll, have your cashier's checks in different denominations, gas in your tank," he said. "You need jet-propelled shoes. I used to be a New York City cab driver; that helps."

On a typical day, up to 300 properties are listed for a courthouse auction in the seven counties Kramer covers. (Alameda, Contra Costa, San Francisco, San Mateo, Solano, Sonoma and Marin.)

"We cherry-pick," he said. "We go after the ones in better locations where the investors can hold the properties or flip them.

"People think, 'I'll do five or six foreclosure deals and then I'll retire,' " he said. "It's not that easy. This is a lot of work."

On Wednesday, Kramer leafed through a printout of that day's Alameda County auctions that had been researched by his staff. About three-quarters were postponed. "That means the owner could have filed bankruptcy or is trying to negotiate or has a pending sale," he said.

He pointed to a three-bedroom Hayward house, originally $309,898, with a minimum bid of $140,000. Something that low could mean it's a second mortgage - in which case whoever buys the property will be responsible for the first mortgage. But in this case, his staff learned from the trustee that the actual minimum bid the bank will take is $314,123. The $140,000 is a teaser bid price, designed to get a herd of bidders caught up in a feeding frenzy.

"It's like playing poker; you try to outsmart competitors," Kramer said. "I always look for an older loan. Most are from 2006 or 2007. If they're from before 2004, then there's likely to be some equity."

He stopped at a listing for a San Leandro triplex. Originally $848,000, it was being offered with a minimum bid of $468,000. "Wells Fargo is willing to take a hit of almost $351,000 on that, and the taxes are already paid," he said, looking at the spreadsheet.

Kramer dialed one of his investors and read off the property specs. "Comps (recent similar sales) are in the low $600,000 to low $700,000s," he said. "There's definitely juice in this. Can you get over there to take a quick look-see?"

Forty-five minutes later, the client said he didn't want to bid on the property.

Another good prospect, a four-bedroom off Skyline Boulevard in Oakland, was selling for $517,500, compared with $831,000 owed on the mortgage and comps in the $700,000 range. The house was rented out for $3,800 a month. Property records show the original owner paid $1 million in 1997, the year it was built. "That's sad," he said. "I think this will get bought in the high $500,000 or low $600,000s."

But he didn't have a client with the means to bid on the property. "I've filled up my investors' buckets," he said.

His staff pointed out some good buys in Pacifica. He couldn't get to the relevant courthouse in time to bid, so he called some friendly competitors. If they were unaware of the property and bought it at his suggestion, he'd get a referral fee.

At the courthouse steps, a dozen investors were gathered. Auctioneer Marc Ramsland started by rattling off a lengthy list of properties for which the foreclosure auction had been delayed, for reasons such as bankruptcy, mutual agreement or beneficiary's request.

Once he actually started auctioning properties, there was little action. For almost every property, after reciting its statistics and requesting bids, Ramsland was met by a resounding silence. "Are there any further bids?" he would ask. "For the second time, are there any further bids? There being no bids, the property will revert back to the beneficiary" - meaning the lender holding the mortgage.

1-cent strategy

When Ramsland got to the big house off Skyline, one man whispered urgently into his cell phone and then bid - exactly one penny more than the $517,500 minimum. The man, who declined to give his name, was the winning bidder at $517,500.01 and handed over a series of cashiers checks to pay.

Kramer approved of that 1-cent strategy. "Why bid $1 over when you can save 99 cents?" he said. "The key is to buy as close to the opening bid as possible."

An obvious limitation for auction investors is having enough liquid funds to cover a bid, especially because many investors have their cash tied up in properties they want to keep. While there is no chance to seek conventional financing before making a bid, a few investors do double-duty as "hard money lenders," providing funds to their fellow bidders on the spot.

John Shiells, who was sitting under the sparse shade of a nearby bush, said he wears two hats, as a bidder and a lender to other bidders. He comes armed with enough funds in cashier's checks to make loans. His terms are simple and lucrative: He makes one-year, interest-only loans at 12 percent and five points (5 percent of the loan amount). Prepayments are not allowed. Borrowers must put up 30 percent of the purchase price themselves. "Investors don't default when they've got their hard money involved," he said.

Many of the courthouse investors have been at it for years, so the current downturn is just a replay of similar real estate slumps they've seen in past decades. They have a wry camaraderie about their unusual profession.

"Marc here sold me the house I live in now years ago," at a foreclosure auction, one said, referring to the auctioneer.

"I've never lived in anything but a foreclosure," another man volunteered.

"Me too," said another, to chuckles. "I get all my furniture from foreclosures, too."

Glossary

Trustee sale: Final step in foreclosure process, when a property is sold on the county courthouse steps. Most often it reverts to the lender, but sometimes investors bid if they see a good deal.

Deficit bid: When a lender drops the minimum bid to less than what's owed on the mortgage.

Crier: The auctioneer.

Teaser bid: An artificially low minimum set by the lender to stimulate bidding; the crier is instructed to bid on the lender's behalf against investors to ensure that the property doesn't sell for this low amount.

California auctions

Month	Foreclosed properties sold	% of foreclosed properties*
January	432	3.4%
August	1,360	4.0

*Properties not bought by investors reverted to lenders.  

First American is lone title insurer bearing good news

By Matt_Carter
Created 08/01/2008

It's looking lonely at the top for First American Corp., as the nation's leading title insurer is the only company in the industry to report good news during the second quarter.

First American said Thursday that it racked up $42 million in profits during the quarter ending in June, as cost-cutting measures outstripped a 20 percent year-over-year decline in revenue, which fell to $1.72 billion. The results beat analysts' expectations and represented a turnaround from the same quarter a year ago, when First American lost $66 million.

In a press release, First American said its second-quarter results could be hurt by a $37.3 million investment First American Title Insurance Co. has in Mercury Companies Inc. Mercury, a Colorado-based holding company, has been forced to close down title and escrow companies in California, Arizona, Texas, Oregon and Nevada (see story [2]).

First American said it cut salary and other personnel costs in title insurance and services by 24 percent during the second quarter, to $338.6 million, closing 94 offices and laying off about 700 employees. The company's direct operations closed 401,200 title orders for the second quarter of 2008, a decrease of 17 percent from a year ago, and saw orders decline each month of the quarter. Another 30 offices have been targeted for closure by the end of the year.

First American Chairman and CEO Parker Kennedy also said the company has delayed plans to spinoff [3] its financial services and information solutions units into separate companies.

"Given the uncertainty in the real estate and mortgage credit markets, we believe it is prudent to delay the split," Kennedy told investors in a conference call. "Our primary focus at this time is expense management, product development and maximizing profitability. We will split the companies when we see more stability in our markets and when the outlook becomes clearer."

First American's closest rival, Fidelity National Financial, reported [4] on July 23 that profits fell 92 percent, to $6.9 million, despite the elimination of more than 1,200 positions in title field operations and an additional 400 positions in other areas of the company during the quarter.

The nation's third-largest title insurer, LandAmerica Financial Group, surprised analysts on Wednesday by posting [5] a larger-than-expected $50 million loss for the second quarter, sending the company's shares plummeting. LandAmerica said it cut salary and employee benefit costs by 39 percent from a year ago, laying off the equivalent of 3,600 full-time employees in title operations in the last 12 months.

Stewart Information Services Corp., the fourth-largest title insurer, reported [6] a $26.6 million loss Wednesday, as revenue fell 25 percent to $428.5 million. Stewart reported laying off 350 employees in the second quarter, bringing year-to-date head-count reduction to 810, or 9.6 percent of the company's workforce. Stewart has closed 68 branch and office locations this year, and laid off 2,400 employees since the end of 2006.

Old Republic International Corp., which reported [7] a $45 million loss on July 24, has the smallest share of the title insurance market among the top five title insurance companies, but is struggling with losses from its private mortgage insurance business.

In a conference call with investors, Old Republic Chairman and CEO Aldo C. Zucaro said the company does not expect to make any money in mortgage guarantees this year or next.

Although there is "some noise out there" about a recovery, Zucaro said, "We think it's wishful thinking … that a rainbow is about to come up on the good ship lollypop. As we (have) said in the past, our expectations are for a continuation of a relatively stressful period before we can see the emergence of profitability sometime in 2010."

According to the American Land Title Association, the top five title insurance providers captured 93 percent of the market in 2007, with $13.23 billion in premiums written. The top five companies were First American (30 percent), Fidelity (26 percent), LandAmerica (19 percent), Stewart (12 percent) and Old Republic (5 percent).

Title insurance companies -- which also generate revenue selling property information to real estate brokerages and investors -- have struggled during the downturn because fewer home purchases mean less business. They have also seen increased claims on title insurance policies written during the housing boom.

The rapid boom-to-bust turnaround could lead to more industry consolidation, a fact alluded to by Fidelity CEO William Foley. In a conference call with investors, Foley said the company is positioning itself to preserve cash to facilitate potential acquisitions.

As the market has deteriorated, Foley said, "We believe that there would be some opportunities with other underwriters or other large operations across the country to perhaps consolidate."

 

Mortgages Ltd's BK Mess will Affect Phoenix for Years- Suns Owner to Help?

Mortgages Ltd. filed for Chapter 11 bankruptcy protection on June 23, 2008, three weeks after the CEO and owner, Scott Coles, was found dead on June 2, 2008. The company is in discussion with Bob Sarver, owner of the Phoenix Suns and Southwest Value Partners, for an emergency $125 million loan.

Unfortunately, most of the investors' money will be tied up in the bankruptcy and the money that the investors will eventually receive will be a fraction of their investment. Bankruptcies are expensive. The bankruptcy attorneys, accountants and trustees will burn up the investors' capital at a furious rate. When the assets are sold, they will be sold at a fraction of the value in a fire sale in a depressed real estate market.

There will be ripple effects in the Phoenix commercial real estate market for years if not a decade. Mortgages Ltd. was a key player in Arizona's building world. It had bankrolled land acquisition, development and construction for commercial real estate. There is no company to take its place.

In addition, Mortgage Ltd.'s investors' capital of approximately $900 million in capital won't be available for future projects for some time, if ever. Other investors will be leery about investing in commercial mortgage companies, further reducing the available capital.

At the July 1st bankruptcy hearing, the court removed the law firm of Greenberg Traurig as Mortgage Ltd.'s general counsel and has asked Laura Martini, the acting CEO to leave the board of directors. The court did allow her to remain CEO for at least 30 days.

The creditors believed that Mortgages Ltd.'s law firm Greenberg Traurig was maneuvering to control the company by transferring the shareholder voting power from a trust that the Coles set up as Mortgages Ltd.'s sole stockholder to a new limited liability company it created after his death.

All the legal maneuverings reduce the amount of money that the investors and creditors will eventually receive.

John Laub is the Chairman of the Phoenix CEO-CFO Group.

1. "Lender Looks to Robert Sarver's Company. Bankrupt Mortgages Ltd. Asks for $125 Million in Aid." Andrew Johnson. The Arizona Republic. June. 29, 2008.

2. "Mortgages Ltd. Leadership Team Shaken Up." Andrew Johnson. The Arizona Republic. July 2, 2008

3. "High-Profile Projects in Limbo. Collapsed Lender Imperils Downtown Developments." Jahna Berry Andrew Johnson. The Arizona Republic. June. 30, 2008.

 

Auctioneer's championship surprises Jodi Sweeney

Tuesday, July 29, 2008
Jean Caspers-Simmet

Agri News staff writer 

WAUKON, Iowa -- Jodi Sweeney never dreamed she'd win the women's division of the International Auctioneers Championship July 11 in Nashville.  The Waukon 21-year-old's plan was to enter as a learning experience and make it to the finals several years later.

But she found herself one of seven finalists after selling a necklace, binoculars and a children's book in the preliminary round. She is the youngest auctioneer to win the contest and was the youngest of the 22 women who competed. She is the first Iowa female to win.  "I was in shock," Sweeney said. "I never dreamed that I'd win first place the first year."

Sweeney is a senior at the University of Northern Iowa where she is majoring in finance and real estate.  A third-generation auctioneer, Sweeney was raised in her parents, Jeff and Penny's, auction business, Sweeney Auction Services. At age six she helped her father and grandfather, Ray, run tickets from the clerk to the cashier. She attended the Worldwide College of Auctioneering in Mason City in 2006, the same school that her father and grandfather attended.

Sweeney was the first female to win the Iowa Auctioneers Association State Bid Calling Contest last summer.  John Nicholls, the 2006 international men's champion, has given Sweeney advice since he judged the preliminary round of the state competition. Cheri Boots-Sutton, a former female champion, gave Sweeney pointers on her wardrobe.  The finalists went through an interview answering three questions.

"John told me I hit a home run on the interview," Sweeney said. "I tried to focus my answers on how I could help the industry instead of just talking about myself."  In the finals Sweeney sold a vintage men's National Auctioneer's Association hat, a woman's ring and a laptop computer. After she won, she sold the flag that was flown over the Capitol during National Auctioneers Day.

Sweeney won a huge trophy, a ring, $10,000 in prize money and a medal. She already spent part of her prize money buying a lifetime membership in the National Auctioneers Association.  In addition to Nicholls and Boots-Sutton, Sweeney said her parents, especially her father, are her mentors.  "It's tough to take criticism from your dad, but I know he's helping me."

Sweeney works part-time for her parents' auction business and is a contract auctioneer for Rich Penn Auctions in Waterloo. She has assisted with auctions in Iowa, Wisconsin and Minnesota and recently earned her salesperson license to sell real estate.  "I'd like to specialize in real estate auctions," she said. "But I'd also like to keep our farm machinery and household and antique auctions going. We'll see where I fit in." Counting with a pretty chant does not necessarily equate to selling real estate.

 

Know Your New York-Lovin' Russian Oligarchs

This isn't shaping up to be an especially good year for New York's ultra-rich. According to Forbes, Moscow recently overtook NYC as the city with the most billionaires per square mile: Moscow had 74 people worth ten figures compared to New York, which had just 71. But those smarmy bazillionaires aren't staying put in Moscow or even in the de-facto Russian mogul ghetto of London. Many of them are spending time right here in New York: Real estate, oil, and metals scions from Russia and other former Soviet republics have been busy snatching up some of the most expensive apartments the city has to offer. Last month, a 42-year-old fertilizer kingpin named Dmitry Rybolovlev agreed to pay $100 million for Donald Trump's Palm Beach mansion, Maison de l'Amitié. The 59th richest man in the world, worth some $12.8 billion, his purchase includes a 33,000-square-foot home and 6.5 acres of land. But he isn't the only one. After the jump, a list of the novi Russki who spend time in New York—just who these Soviet oligarchs are, how they made their money, and what exactly they're up to in town.

Leonard Blavatnik
A Russian Jew, Blavatnik moved to the U.S. in 1978 when he was 21. He's now worth a reported $7.2 billion thanks to investments in coal, real estate, aluminum, petrochemicals, and plastics. His primary holding company is called Access Industries; he's also a partner in the Renova Group with Viktor Vekselberg (see below). Blavatnik is a part-time resident of the city—he also spends a good deal of time in London—but he's been on a real estate buying spree in New York City over the past year. He owns a East 64th Street townhouse that he purchased from Edgar Bronfman Jr. for $51 million, and is rumored to be behind the 2008 purchase of the townhouse once occupied by Jocelyne Wildenstein. In London, he lives in a home in Kensington Park Gardens that he purchased for $73 million in 2006.

Lev Leviev
A native of Uzbekistan, Leviev moved to Israel and now divides his time between the religious enclave of B'nai Brak and a home in London. Worth an estimated $8 billion, Leviev made a fortune from real estate and oil, but he's best known for his investments in the diamond trade. (He's partly responsible for breaking up the De Beers diamond cartel.) A close pal of Vladimir Putin, Leviev is a devotee of the Brooklyn-based ultra-Orthodox Chabad movement (a former business partner is fellow Chabadnik Shaya Boymelgreen). He's also a major patron of Jewish causes in the former Soviet Union.

Leviev's holding company, Africa Israel Investments, is one of New York City's biggest landlords. The company owns such properties as 23 Wall Street, 88 Leonard, and Downtown by Philippe Starck; it also holds stakes in the Apthorp on the Upper West Side, the Met Life Clock Tower at 1 Madison, the old New York Times building, and an eponymous diamond boutique on Madison Avenue. His diamond company, LLD USA, is headquartered on 47th and 5th. Although he comes to town frequently, his primary residence is in London, where he lives in a $70 million home with a $100,000 bulletproof front door.

Roman Abramovich
41-year-old Abramovich is Russia's second-richest man, with a fortune estimated at $23.5 billion in 2008. Through his fund, Millhouse Capital, Abramovich has significant investments in aircraft and aluminum industries; he's also the owner of the popular British soccer team Chelsea Football Club. He may be most famous, though, for his penchant for spending money. Abramovich is believed to own five jumbo ships (the largest of which is the 377-foot Pelorus) and it was Abramovich who paid $2 million to have Amy Winehouse perform at the opening of his new art gallery in Moscow in 2008.

Abramovich spends most of his time in Moscow and London with his twenty-something girlfriend; with his ex-wife, Irina, a former Aeroflot stewardess, he has five children. His London home in Belgravia is worth an estimated $60 million. (He also has an estate in West Sussex worth $40 million.) But he's now in the process of building the most expensive home in Britain, a manse that will end up costing him $150 million when all is said and done. But Abramovich spends a considerable amount of time in New York, too. He's a regular at contemporary art auctions and in May 2008, he spent $33.6 million on Lucien Freud's Supervisor Sleeping at Christie's—the most ever paid for a painting by a living artist—and then $86.3 million on a Francis Bacon triptych at Sotheby's a day later. He commutes to NYC aboard a Boeing 767 and reportedly stays in the Ty Warner suite at the Four Seasons on 57th Street. The 4,300-square-foot suite includes four terraces and private gym and costs $30,000 a night.

Vassily Anisimov
Worth more than $2 billion accordng to Forbes, Anisimov (or Anisimova) made his fortune in the metal industry, particularly in the aluminum mining business. (One of his business partners was Marc Rich, the ex-husband of Denise Rich; another former business partner is Leonard Blavatnik.) He's also a major real estate investor in New York: His Coral Realty owns a number of properties in the area around NYU and developed the Sugar Warehouse and the Electra, a luxury rental on First Avenue.  He also owns a residential complex in Jersey City.

He's best known, though, as the father of socialite Anna Anisimova, and he occasionally stays with his daughter at the $15 million condo he purchased for her in the Time Warner Center. It's a smaller family these days: In 2000 Anisimova's daughter from his first marriage and his son-in-law were assassinated in Russia.

Tamir Sapir
A native of the republic of Georgia, Sapir moved to the U.S. in the 1970s and drove a cab for a spell when he first arrived. He later made his fortune in the black market electronics trade and chemicals industry before turning to real estate. His first big project, 2 Broadway, resulted in a flurry of lawsuits and accusations of ties to the Mob; more recently, he co-developed the William Beaver House with Andre Balazs and partnered with Donald Trump on the Trump Soho.

Sapir spends most of his time in NYC. He bought the Duke-Semans mansion on Fifth Avenue for $40 million in 2006, but he doesn't live there. (He uses the space to house his massive ivory collection.) He primarily lives in a spread at the Trump Tower, and also owns massive estates on Long Island and in Acapulco.

Viktor Vekselberg
Worth $11.2 billion according to Forbes, Vekselberg presides over the Renova Group with business partner Leonard Blavatnik. The company makes its money in the oil and aluminum industries. Vekselberg was in the news in 2004 after he purchased the famed Faberge egg collection of publishing magnate Malcom Forbes (put up for auction by Steve Forbes) at Sotheby's for a figure believed to be near $100 million. The bearded billionaire owns a lavish spread in Weston, Connecticut and a pied-à-terre in the Park Millennium in Midtown. His daughter attended Yale business school.

Andrei Melnichenko
Just 36, Melnichenko is worth $6.2 billion per Forbes. After making an initial fortune in currency trading, he created an industrial empire with fellow billionaire Sergei Popov. He landed in the newspapers in New York when his MDM-Bank was involved in the scandal in which Russian organized crime rings were accused of laundering $7 billion through the Bank of New York. He's also known for his lavish spending. His 2005 wedding to a Serbian model near Cannes cost him $40 million, including a $3.6 million for a performance by Christina Aguilera. He paid Jennifer Lopez $2 million to perform at his wife's 30th birthday party in 2007.

Roustam Tariko
Worth $3.5 billion, Tariko is best known for creating the high-end brand of Russian vodka, Russian Standard, but he also owns banking and insurance businesses under the Russian Standard name. In New York, he's best known for spending $3 million in 2005 on a party on Liberty Island to introduce his vodka to New Yorkers. Tariko commutes to New York aboard his Boeing Business Jet and says he likes to run in Central Park when he's here. He also enjoys inviting notable New Yorkers to visit him in Russia. He gave Martha Stewart a grand tour in 2007, zipping the domestic diva around the Russian capital in his black Bugatti Veyron, the only one in Russia.

Sergey Gordeev
Just 35, Gordeev made his billion-plus fortune in real estate. He's also involved in politics—he holds a seat in the Russian senate. An avid architecture enthusiast, Gordeev earned a rep as the savior of ugly Soviet-style buildings. Here in New York, he's donated heavily to the Guggenheim. It was Gordeev who bankrolled the exhibition "Lost Vanguard: Soviet Modernist Architecture, 1922-32" at the MoMA in 2007.

Valery Kogan
The chairman of East Line Group, which controls Moscow's Domodedovo International Airport, Kogan has a net worth estimated at $600 million. He was relatively unknown in these parts until he proposed to knock down his 20,000-square-foot home in Greenwich (which he bought for $18 million in 2005) and then build the biggest house the city has ever seen: a 54,000-square-foot mega-mansion complete with 26 bathrooms as well as a dog grooming room and Russian and Finnish baths. Greenwich's zoning commission officially rejected Kogan's plans in May 2008.

Boris Belotserkovsky
A gambling magnate, Belotserkovsky is the co-owner of Ritzio Entertainment Group, Russia's biggest casino company. He's publicly condemned Putin for placing restrictions on gambling in Russia and attempting to relegate casinos in the provinces. That might explain why he spend a good deal of time in New York these days. When he's in town, he's stays at a $5 million condo in the Plaza.

Vladimir Stolyarenko
The CEO of the major Russian bank Evrofinance, the shadowy Stolyarenko bunks down in a $10.1 million condo at the Plaza when he's in Manhattan. He's known for having especially close ties the Kremlin, unlike his Plaza neighbor Belotserkovsky (see above), which must make for awkward elevator conversation.

Boris Berezovsky
Trained as a mathematician, Berezovsky took over a crumbling Russian automaker in the immediate aftermath of the USSR's collapse and parlayed it into bigger things: He's now worth $1.3 billion, according to Forbes, and has since diversified into oil and other industries. Russian prosecutors tried and failed to extradite London-living Berezovsky for crimes he committed during the "wild capitalism" era of the 90s. He later sued Forbes after its Moscow bureau chief, Paul Klebnikov, tied him to to the assassination of prominent television journalist Vladislav Listyev. The case was settled, although Paul Klebnikov was also later assassinated. In recent years, Berezovsky has earned the enmity of the Putin regime by openly questioning the government's involvement in the poisoning death of ex-KGB agent Alexander Litvineko. (Putin et al pointed the finger at him in turn.) Although based in London, he spends a good deal of time in New York, where his Foundation for Civil Liberties is based. He has a pied-a-terre in the Trump International building.

 

Existing-Home Sales to Trend Up in 2008

WASHINGTON DC

Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of Realtors®.  However, a recovery for new-home sales is unlikely before 2009.

Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data.  “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said.  “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September.  It was the second consecutive monthly gain, but remained 18.4 percent below the October 2006 index of 106.8.  “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun said.

The PHSI in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago.  In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006.  The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago.  In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.

“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun said.  “Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.”

Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006.  Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.

“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008.  I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun said.

“Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases,” he said.  “The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”

Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash.  “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”

New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009.  Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year.  The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.

The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates. Growth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 2008.

The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008.  Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006.  Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
                                                             # # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months.  There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

 

Bidders find huge bargains at real estate auctions.
But, let the buyer beware!

By STEVE EVERLY

The Kansas City Star

Richard Keller of Kansas City has several rental properties and is a regular at foreclosure auctions. On Saturday he was “looking for bargains” at the auction of 91 properties in the metro area.

Marjain Breitenbach arrived at a real estate auction Saturday hoping to snag a good deal on a foreclosed home in Independence. He wasn’t disappointed.

The two-bedroom home at 2328 S. Claremont Ave. had been purchased for $69,000 before the owners fell behind on the payments and the lender foreclosed on the property. Breitenbach thought he could buy it for $30,000. He got it for exactly half that amount. “I’m in good shape,” he said.

There were 91 homes auctioned Saturday in a Kansas City hotel ballroom near the Truman Sports Complex as lenders sought to reduce their inventory of foreclosed homes in the aftermath of subprime loans and a deflating real estate market.

The sale came amid warnings that the situation is getting worse. A report by RealtyTrac said the number of foreclosures rose 53 percent in June compared to the same month in 2007. And earlier this month, U.S. Treasury Secretary Henry Paulson said that there could be 2.5 million home foreclosures this year.

Saturday’s auction added to the gloom for those worried about sagging real estate, suggesting that, especially in some neighborhoods with modest homes, real estate values are being pummeled. Of the 91 houses auctioned off, only two were in Johnson County. A majority of the houses auctioned were small, with roughly 1,000 square feet of living area and one bath. A home at 3336 Wabash Ave., which Zillow.com, an online appraisal site, had estimated was worth $67,900, was auctioned for $5,500. It had been on the market for about half the appraised value.

“The foreclosure business is very busy,” said Pat Harvill.

Lenders were once reluctant to auction off their foreclosed properties. But they have changed that stance as their inventories of the homes have continued to rise. Another sign of their eagerness to sell is that while lenders have the right in the auctions to reject a winning bid, they are increasingly declining to do so. About 80 percent of bids are now accepted. The auctions aren’t for the faint-hearted, although the surroundings were pleasant enough. Pitchers of ice water were on tables at the back of the Sheraton hotel’s ballroom, and the bidding was interspersed with recorded music.

But the sale was fast-paced for the 100 registered bidders, with each home being sold in about two minutes. The homes had been previously opened for inspections, but the bidders were reminded of the pitfalls with an announcement that a Sugar Creek home that was to be auctioned had been condemned by city officials. Those with winning bids also had to immediately pay a $2,500 deposit that is forfeited if the balance of the sale price plus a 5 percent commission isn’t paid in 30 days.

Michelle Bishop of Los Angeles is one of them. Originally from the Kansas City area, she hopes to eventually come back here and wants a four-bedroom home for herself and her family. Shut out of the California housing market because of its high prices, she hopes to get a residence here at a bargain price. An auction, in short, is her way to the American dream of home ownership.

“That’s exactly the way I look at it,” she said.

 

Home prices continue sharp descent
By Les Christie, CNNMoney.com
Jun 17th, 2008

Single-family home prices dropped 7.7% in the first quarter in the largest year-over-year decline since the National Association of Realtors began reporting prices in 1982. The median sales price fell to $196,300, down 4.8% compared with the last three months of 2007.

Lawrence Yun, the chief economist of NAR, attributed much of the record decline to liquidity problems dragging down high-priced markets. "These are highly unusual results because there were very few jumbo loan originations in the latest quarter," he said. "So sales are much slower in high-cost areas."

Jumbo mortgages skew results
That sales slowdown changed the mix of houses sold. In California, according to Yun, homes bought with jumbo mortgages - more than $417,000 - accounted for 40% of all sales before liquidity for these loans dried up during the summer of 2007. Since then only 10% of sales in California involved jumbo loans.

In February, Freddie Mac and Fannie Mae, the government sponsored enterprises that guarantee a market for conforming loans, have raised the $417,000 cap to include mortgages of up to $729,750, but lenders were still charging much higher rates for these "conforming jumbos," between 1% and 1.5% more than ordinary conforming loans. The higher rates are discouraging sales in higher price ranges and so skewed NAR's median price results.

Many of these same markets were also among the hardest hit by the subprime implosion, which forced many lower priced homes back on the markets, again dragging down NAR's results. That helped put many California and other Sun Belt cities, with their toxic combinations of both high prices and heavy proportions of subprime mortgages, among the biggest losers.

In California, Sacramento prices plummeted 29.2% to $258,500 compared with last year and Riverside prices fell 27.7% to $287,100. Prices in Las Vegas fell 20.2% to $247,600 and those in Phoenix dropped 15.4% to $222,200. Some Midwestern cities, hard hit by factory closings, also suffered huge losses with Lansing, Mich., prices falling 26.9%. Saginaw, Mich., had the lowest median prices of any of the 150 markets studied; a median house in Saginaw sold for just $65,400.

"You have two themes: the weak industrial economies under increasing pressure by struggles of the Big Three automakers and the deflating of what were once the most prominent bubble markets," said Michael Youngblood, an analyst with FBR Investment Management.

About of a third of the markets did show gains. The best performer in the nation was Binghamton, N.Y., where prices rose 11.8% to $109,700. Then came Peoria, Ill., up 10.4% to $119,000 and Spartanburg, S.C., where prices rose 10.2% to $130,300.

Regionally, in the Northeast, single-family home prices rose slightly, 3.2% to $280,000. But prices in the South dropped 7.5% to $164,200, in the Midwest they fell 7.9% to $142,700 and in the West they plunged 12.3% to $296,300.

Foreclosures put more homes in play
Hurting home prices were big rises in foreclosure rates over the past 12 months, which threaten to get even worse. Delinquencies more than doubled over that time and more than 155,000 lost their homes in bank repossessions during the first three months of the year. With many adjustable rate mortgages (ARMs) poised to reset this year to higher interest rates, defaults could go even higher.

"Yes, but I hasten to say it's not merely the ARMs," said Youngblood. "Fixed rate loans are performing poorly as well."

All that foreclosure activity added to the glut of homes on the market. The total inventory has risen to an average of 10 months worth of unsold homes. In addition, a record number - 2.9 million - of vacant homes are up for sale, according to the Census Bureau. The big inventory has led to aggressive price slashing and increased incentives by builders looking to sell homes. They've also cut way back on housing starts, which are at a 17-year low.

The pace of existing home sales, at about 492,000 a month, is about a third less than its peak during the summer of 2005. Condo prices fared a bit better than single-family homes. The median price fell just 3% since early 2007. The worst hit market was the Sarasota area, where condos dropped 35% over the past 12 months to $268,500. Sacramento condo price cratered 33.4% to $147,200. In Miami, prices fell 26.4% to $176,100.

The best performing condo market was about as far from the madding crowds of South Beach as one can get: Bismarck, N.D., condo prices soared 36.4% compared with 12 months ago, to $124,900. The price declines in falling markets may not have run their course. Some analysts point to low home prices in many Midwestern cities and assert there's not much room for prices to fall but Youngblood disagrees.

"If we'd had this discussion a year ago, we would have said the same thing - how much further can they fall?" he said. "But jobs are declining and people are moving out and you're getting sharper home price declines than you ordinarily would."

Also, according to Youngblood, the sheer volume of foreclosures takes a toll. "Recent studies report that foreclosed properties sell for an average of 20% less than comparable properties that have not been foreclosed on," he said. As for the bubble markets that have already lost 30% of their values, Youngblood thinks their declines are not over. He expects some to drop another 20% or so through February 2009.

 

Sold - and it's another home result
As the housing market continues to tumble, auctioneers' hammers are coming down on ever more bargains

Andrew Moody The Observer, Sunday June 8 2008

Article history: People buying at auction are snapping up properties at up to 30 per cent below estate agent prices, according to the latest market estimates.

Combined with the credit crunch, a flood of properties coming into auction rooms from repossession companies has made it possible for buyers with funding to secure real bargains. Many auction houses report a big change in mood in the salerooms over the past two or three months: until recently, amateur investors and developers inspired by such programmes such as Homes Under the Hammer often bid prices up to levels above those of similar properties available through high-street agents. Now, according to the Essential Information Group (EIG), the auction information company, around 48 per cent of lots are not selling, which means prices are being driven down. David Sandeman, managing director of EIG, says there has been a sudden change of atmosphere.

'Those who used to attend auctions with an eBay mentality - that because it was an auction you were going to get a bargain regardless of how much you paid - have gone,' he says. 'The serious buyers have a real opportunity. Money talks like it never has before.'

Guy Charrison, a consultant auctioneer who conducts auctions across the UK and was the auctioneer at a sale Cash visited in Manchester, believes current market conditions represent a unique opportunity for the retail buyer with cash. 'Ironically, the increasing popularity of auctions over the past 10 years due to TV programmes like Homes Under the Hammer made it more difficult to get bargains at auctions. Now, however, there is a real opportunity.

'You are paying at most 80% compared to the pound you were paying a year ago. First-time buyers with parental cash behind them can secure a good deal. It is also a good time for anyone looking to buy student accommodation for their children which they can also rent out to other students. Many auction properties are suitable for that purpose.'

Corporate sellers, such as lenders disposing of repossessed houses, insolvency practitioners and property investment companies, are becoming increasingly keen to offload properties in the current market conditions rather than let them sit around for months in estate agent windows. 'They want to get properties off their books and if that means selling a property an estate agent might value at £110,000 for £70,000, they are prepared to do that,' says Louise McDonald, auction director at Edward Mellor.

The property that Samantha Walton bought in Romiley, Cheshire was sold with no reserve by Ian Macleod, 61, who runs a property investment company in Shropshire. In theory, it could have been sold for £1. His company originally bought the property 30 years ago for £12,000, so the £125,000 achieved represented a major investment return, even though it was far less than the £165,000 he had tried to sell it for through an estate agent.

'It had proved difficult to sell,' Macleod says. 'We had a number of interested buyers but potential sales fell through. However, we made a return on our investment and were very pleased to sell it at auction.'

Of the 95 lots at the Edward Mellor auction, only about 35 per cent sold, with the rest failing to meet their reserve. Following the sale, interested buyers were trying to secure post-auction deals with vendors.

McDonald believes that the current number of unsold lots will mean auctions will become even more favourable to buyers: 'I think vendors are going to be more realistic in the future about the level of reserve they set.'

According to EIG, 23 per cent of the number of auction lots are repossessions, a figure that is rising. Some auction houses are also taking in a heavy volume of properties from frustrated buyers who cannot sell on the open market.

Andrew Binstock, director of Sutton Kersh Binstock, a London auction house, says the number of properties his company has appraised for auctions has tripled since January. He believes it is due to around 45 per cent of house sales falling through. 'There has been a huge increase in the number of deals falling through,' he says. 'Thousands of people feel really let down and are choosing auctions because they are fed up of buyers gazundering them.'

Anyone buying at auction will typically have to put down a deposit of 10 per cent on the day. They then have 15 to 28 days, depending on the terms of the auction house, to complete the transaction. If they fail to do so, they forfeit the deposit.

Sandeman says that the credit crunch has made obtaining auction property finance more difficult. 'Until very recently people were bidding at auction, securing a bridging loan, doing the property up a bit then going to one of the buy-to-let companies and securing a 95 per cent mortgage on a value higher than they had paid. They weren't paying a penny of their own money. That has all changed now,' he says.

Some see current market conditions as an excellent opportunity to invest in property. Parmjeet Singh, 38, who runs a grocery business in Lancaster, picked up a terraced house in his home town for just £47,250 in the Manchester auction. 'With many lots going unsold there are bargains to be had,' he says.

However, Sandeman warns that while now may be a good time to pick up a bargain at auction, what is going to happen in the market is very difficult to gauge: 'What may be a bargain now may not prove to be such a bargain in two or three months' time if the market takes an even bigger slide.'

A tale of two buyers

Tony Ashton
Three-bed townhouse for £72,000

Tony Ashton was a cash buyer who got 30 per cent off a high-street estate agent price at an auction attended by Cash last week. The 47-year-old, who runs his own building company, Independent Lifestyles, which adapts properties for people with disabilities, bought a three-bedroom townhouse in Warrington at the Edward Mellor Auction at the Old Trafford cricket ground in Manchester.

He paid £72,000 - around 30 per cent less than similar properties are costing through agents. He now intends to rent it out for £500 a month. 'I was looking at buying a property on the same road 12 months ago for £100,000. Then it was almost impossible to buy in the town for less than that figure,' he says.

'It is a good buy because even if there was to be a substantial crash in the market I can't see this property going any lower than what I have paid. I think now you are in a great position if you are a cash buyer to pick up these bargains at auction.'

Samantha Walton
Three-bed semi for £125,000

At the same auction, Samantha Walton, a 31-year-old pub landlady from Hyde, Cheshire, picked up her first property, a three-bed semi-detached in Romiley, Cheshire, for £125,000, nearly 25 per cent less than its estate agency price of £165,000.

'I am really happy with it,' she says. 'I wouldn't have been able to buy a property at this price through an estate agent because sellers are not prepared to drop their prices. Buying at auction has been a great way for me to get into the property market.'

 

Soft Existing-Home Sales Expected Near-Term But to Rise Midsummer
WASHINGTON, May 07, 2008

A flat pattern in home sales activity should continue for the next couple months before improving over the summer, according to the latest forecast by the National Association of Realtors®.

Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. "Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas," he said. "As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available."

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March 2007 index of 103.9.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said additional costs in many markets are hindering a recovery. “Our members are telling us that more buyers are looking at homes but are slow in signing contracts, and that’s contributing to the weakness in pending home sales,” he said. “In many cases buyers are waiting for greater access to affordable credit, especially in higher cost areas, but some are disappointed with what appears to be unnecessarily restrictive lending requirements. The good news this week is there is some discussion toward relaxing some of the burdensome lending practices.”

The PHSI in the Northeast jumped 12.5 percent in March to 80.8 but remains 15.4 percent below a year ago. In the South, the index slipped 0.1 percent to 84.9 and is 26.7 percent lower than March 2007. The index in the West declined 1.4 percent in March to 91.2 and is 9.5 percent below a year ago. In the Midwest, the index fell 10.4 percent in March to 74.1 and is 22.3 percent below March 2007.

Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter. For all of 2008, existing-home sales are likely to total 5.39 million, and then rise 6.1 percent to 5.72 million next year. “Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied,” Yun said. The median price is forecast at $213,700 this year before rising 4.1 percent to $222,600 in 2009.

Some areas already are seeing sales increases, underscoring that all real estate is local. In March, unpublished snapshot data shows sales in Bakersfield, Calif., and Jackson, Miss., were higher than a year ago. At the same time, price gains were noted in markets such as Buffalo-Niagara Falls, and Cedar Rapids, Iowa. On May 13, NAR will report first-quarter data on metropolitan area home prices, covering about 150 metro areas, and state home sales.

"Although some market adjustments are necessary, a downward overshooting of the housing market would cause unnecessary loss in economic output, income and jobs," Yun said. "It is critical to stimulate housing demand by inducing fence sitters back into the market. A home buyer tax credit on any home purchase would accomplish that."

New-home sales are expected to fall 30.9 percent to 536,000 this year before rising 10.1 percent to 590,000 in 2009. Housing starts, including multifamily units, will probably drop 29.5 percent to 955,000 in 2008, and then rise 1.3 percent to 967,000 next year. The median new-home price is estimated to fall 3.7 percent to $238,000 this year, and then rise 5.4 percent in 2009 to $250,900.

The 30-year fixed-rate mortgage is likely to rise gradually to 6.2 percent by the end of the year, and then average 6.3 percent in 2009. NAR’s housing affordability index is expected to rise 10 percentage points to 127.0 for all of 2008.

Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.3 percent in 2009. The unemployment rate is projected to average 5.3 percent in 2008 and 5.5 percent next year.

Inflation, as measured by the Consumer Price Index, is seen at 3.4 percent this year and 2.2 percent in 2009. Inflation-adjusted disposable personal income is forecast to grow 1.2 percent in 2008 and 3.0 percent next year.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for April will be released May 23; the next Forecast / Pending Home Sales Index will be released June 9.

 

Foreclosed houses turn into bargains at auction prices  'If you can buy right now, buy. If . . . not, you're missing . . . a huge opportunity.'

Monday, May 12, 2008

Laura Johnston

Plain Dealer Reporter

Strongsville- With a riff of a keyboard and a blitz of gibberish, the house appears: No. 209. Three bedroom, 1½-bath, squat and modern in Parma Heights, it's the one Ruth Schneider wants.

As bidding begins, numbers collide, race, roll from the auctioneer's mouth. Schneider raises her card. She's in.

In seconds, she boosts her bid. In minutes, she buys the house - listed at $125,000 - for $102,000. "Wooo!" yells ringman Shannon Mays, as she softly high-fives Schneider. "Congratulations!

The deal, finished almost before a brain can make sense of the shouting, was one of about 100 foreclosed, bank-owned properties sold Sunday at the Strongsville Holiday Inn Select. Prices ranged from $5,000 to $177,500, with addresses from Vermilion to Painesville, Shaker Heights to Aurora. And while the usual companies snapped up homes, more average homeowners took chances too.

The sales are growing, with live residential auctions producing $16.9 billion in sales nationwide last year, up 5.3 percent from 2006.  "With prices dropping, everybody feels like they can be a real estate mogul," said John Leggett.

Schneider, a Brecksville real estate appraiser and mother of two, and her firefighter husband plan to gut the kitchen and bathrooms of their purchase and resell for at least $165,000.

 

10 Most Challenging Housing Markets

The hardest places to sell homes are those with falling prices and a large inventory of unsold homes.  Forbes magazine, which examined markets all over the country, concluded that Florida has the most markets that are really in the doldrums. Several cities there are overbuilt, saddled with lousy loans and flat sales.

Jonathan Miller, president of Miller Samuel, a Manhattan-based real estate appraisal company that assisted with the analysis, says it is hard for a city to climb out of a slowdown because in the best of circumstances there's generally a three- to six-month lag between the time buyers start putting a serious dent into the inventory and the time when prices start to improve.

Here are the 10 markets where Forbes says the sales opportunities are the most challenging:

1. Miami
2. Orlando
3. Phoenix
4. Tampa
5. Los Angeles
6. Washington, D.C.
7. Chicago
8. Baltimore
9. San Diego
10. Denver
    Sources: Forbes, Matt Woolsey (04/15/08)

 

Housing prices keep falling as slump enters its third year

Sellers lowering expectations to close deals
By Kimberly Blanton
Globe Staff / April 29, 2008

Home sellers in Massachusetts are slashing prices at double-digit rates to close deals, but there is no evidence the lower prices will end a housing slump now entering its third year. Some of Boston's more popular suburbs had dramatic price drops for single-family homes in the first quarter of 2008 - prices were down 19 percent in Acton, 23 percent in Westford, and 31 percent in Sudbury - compared with the same three-month period last year.

"It's a self-reinforcing cycle where prices drop and people stay out of the market because prices drop, and that makes prices drop even more," said Patrick Newport, an economist for Global Insight, a Waltham economic consulting firm. "There's potential for prices to drop even more than they did in the 1990s."

That housing slump lasted 3 1/2 years and, by the end, prices had fallen 10.2 percent from the market's previous top. Real estate agents said the only way sellers in many communities can attract buyers is by cutting their listing prices. But the sharp drop in the number of sales indicates these price cuts have been either too small, or too few, to close many deals.

"The offers don't come together. A buyer and seller might stale mate over $10,000 or $15,000, and you go back to square one. We're seeing a lot of that," said Michael Clancy, an agent in Weymouth. Among those homes currently for sale, fewer owners have cut their listed prices this year - 41 percent in the greater Boston area - than did last year -55 percent - according to the MLS Property Information Network Inc.

The median price for a single-family home that sold in March was $304,000, down from $340,000 in March 2007, according to Warren Group. The Massachusetts Association of Realtors had a similarly dour report: Prices for single-family homes fell 8.4 percent and sales declined 32 percent. The association tracks only sales made through real estate agents, while Warren included additional sales, such as those made directly by owners. The March data typically represent deals signed in January and February.

Some markets appeared to be bucking the trend and reported price gains in the first quarter. Prices on average rose 16 percent in Arlington, 18 percent in Hingham, and 22 percent in Newburyport. But there is so little activity in some communities that the sales prices could be skewed by just a few transactions, both positively or negatively. In some towns, only the most desperate owners may be striking deals, resulting in larger price drops, while in other communities a few trophy homes could skew prices higher.

Another factor is the large number of foreclosed homes hitting the market. Warren Group earlier reported that 1,200 homes were seized in foreclosure in March -significantly higher than a year ago. The number of new petitions to seize homes climbed, indicating foreclosures will continue to weigh down the market.

"That will have a lot of impact on the market," said Timothy Warren Jr., Warren Group's chief executive. While condominium prices had been holding up better than single-family prices, that market is slow, too. Sales plunged 35.6 percent in March from a year ago, according to Warren Group. Condo developers are increasingly turning to auctions to unload units, both in Boston and the suburbs.

Next month, 25 units at the upscale Concord Commons development will be auctioned, while the owners of the Residences at Peabody Crossing will auction 18 condos. The Peabody project's developer, Town & Country Homes of New England Inc., set minimum prices for various units in the $200,000 range. Some of the units that already sold at Peabody Crossing went for more than twice that, said Sue Hawkes, chief executive of Velocity Marketing, which is handling the auction.

The developer "was hoping there'd be a good spring market like everybody else and realism set in," Hawkes said. The company was "more comfortable moving on and selling the property he has before there is further potential erosion" in prices, she said.

Thomas Skahen, a partner with Prime Time Communities, a Littleton marketing firm, sees two different markets in Massachusetts. Prices are rising in downtown Boston and some high-priced suburbs, while second- and third-tier neighborhoods struggle with soft sales and foreclosures, he said. Skahen's firm recently dropped the prices sharply for 36 condos in Holden.

"We're still not getting any activity," he said.

 

A strong case for market optimism
Believe it or not - you have several good reasons to believe the sky isn't falling.

In fact, it may be clearing up.

(Money Magazine) -- The economy is in trouble and fear rules Wall Street. No wonder. Banks and other financial companies are posting huge losses. The Federal Reserve has had to engineer a rescue of investment bank Bear Stearns. Home prices are sinking.

The Fed is cutting interest rates to battle recession, but the stock market refuses to be calmed. The Dow swings wildly even as it teeters on the edge of a bear market. And oil keeps rising while the dollar keeps falling. It's all unsettling in the extreme.

But the really scary question is, What's next? Are we at the start of a deep recession and a crushing decline in stock prices? And however serious the problems, how can you best protect your investments?

I'd argue that if you apply a little long-term thinking to the worries that are keeping you up at night, you may well conclude that the outlook for your portfolio isn't so bad - and in fact, that it may even be mildly encouraging.

We've had downturns before. Why does this one seem scarier?
Normally, bear markets and recessions are simply a phase of the business cycle. But the current slump in the stock market and the economy has a different, and potentially more dangerous, origin - a financial crisis.

The outlines of the story are by now depressingly familiar. When the real estate boom ended, a variety of supposedly safe mortgage-backed financial instruments turned out to be poison. The banks and other institutions that owned this debt - or were exposed to it indirectly - suddenly found themselves on the hook for enormous losses. Exactly how big no one could say. The uncertainty has made them much more cautious about lending, and that in turn is hurting companies that rely on short-term borrowing.

Falling home prices and the credit squeeze also hit consumers directly. The cash-out refinancings that homeowners used to pay off other debt and support their standard of living are harder to come by. The big fear is that reduced consumer spending and a credit crunch together could trigger a recession much worse than the normal business-cycle slump.

How bad could things get?
Bear markets that are set off by a shock can be severe. The Great Depression of the 1930s, the stagflation caused by the oil crisis in the 1970s and the real estate bust in Japan in the 1990s all crushed stock returns for years.

Among the most pessimistic economists now is New York University's Nouriel Roubini. He worries that the damage caused by the housing bust will be too big for the Fed to contain. Roubini expects that without far more extensive government intervention, home prices will fall a lot further, leading millions of homeowners to walk away from their mortgages. Banks will have to write down the value of mortgage-backed assets much more sharply than they already have.

The resulting domino effect would knock down the entire financial sector, commercial real estate and commercial lending. The process could take several years to play out and would wreak havoc on the portfolios of pros and Joes alike.

Other gloomy forecasters take more measured positions, but many still believe that the decline in housing prices is at best half over. They expect that stocks will suffer another significant decline and that any near-term rebound in prices will prove only a temporary respite.

That sounds awful. Why on earth should I be optimistic?
First, remember that predictors of doom make headlines precisely because their positions are so extreme. Most forecasters are more positive. The UCLA Anderson Forecast still anticipates that the slowdown won't even be severe enough to rank as an official recession. (To qualify, the economy has to actually shrink for at least six months, not just stagnate.)

Edward Yardeni of Yardeni Research is one of many economists who expect a short, shallow recession during the first half of the year with a recovery starting by fall, and he projects that S&P 500 operating earnings will rise 7% for the year. Yardeni also notes that the price/earnings ratios of big value stocks are quite low and that growth stocks are the cheapest they've been in more than a decade.

Even Warren Buffett, who has said we're now in a recession, is bullish longer term. His Berkshire Hathaway has sold a variety of options basically betting that the stock market is close to a bottom.

I'm inclined to agree that the outlook for the economy is more encouraging than most investors seem to think. For one thing, it appears likely that most of the damage has been done and that stock prices today reflect what are now widely recognized problems. Moreover, while you can find similarities between the three big shocks of the past 80 years and today's situation, none really matches present circumstances. Let's look at them in more detail.

Depression. The 1929 stock market crash was the best-known event leading into the Great Depression, but the loss of paper wealth wasn't what unleashed the calamity. The more important causes included bank failures, excessive consumer debt and restrictions on international trade. Some of these seem to have parallels today, but the most important factor is completely different.

As banks failed in the early 1930s, the Federal Reserve allowed the money supply to shrink by as much as 35%, causing the economy to keep contracting. Today, by contrast, the Fed has been pumping money into the economy as fast as it can. Over the past year, in fact, the money supply has grown more than 7%.

In addition, the Fed is intervening to an unprecedented degree to shore up troubled banks and brokerages. It's likely that Bernanke & Co. will keep pushing interest rates down to make it easy for banks to lend money, thus minimizing the credit squeeze.

Once all the banks' bad loans have been identified and written off over the next year or so, some institutions will be out of business and others will have been forced to merge à la Bear Stearns. Their stockholders and bondholders will have suffered - a lot. But most of the U.S. economy will be poised to recover.

Stagflation. In the 1970s a sharp spike in oil prices following the OPEC embargo produced a devastating combination of slow growth and soaring inflation. Today oil prices are as high as they were in the '70s, after adjusting for inflation. Yet the U.S. economy is more than twice as energy-efficient as it was back then.

Like a car that gets 28 miles to the gallon instead of 14, today's economy can better tolerate high fuel costs (although there is still some pain). And despite a few bad inflation numbers in recent months, pressure for price increases generally remains moderate.

Stagnation. In the late 1980s, Japanese real estate boomed. When the bust came, financial authorities there kept trying to prop up prices so that companies could avoid big write-downs. The result was much like removing a bandage very slowly, and for 13 years investors in Japanese stocks felt the pain.

 

Forsythe Appraisals Says New Appraisal Agreement with Fannie Mae and Freddie Mac Will Help Restore Consumer Confidence in Home Market

ST. PAUL, Minn.--(BUSINESS WIRE)--One of the foundations of a residential real estate transaction is an accurate, objective assessment of a home’s value. Regardless of market trends, buyers and mortgage lenders rely on independent professional appraisers to provide an impartial valuation of the property.

To ensure objective appraisals, New York Attorney General Andrew Cuomo has reached an agreement with Fannie Mae and Freddie Mac, the two largest sources of U.S. mortgage financing, to establish a code of conduct for appraisers.

“There is no doubt that restoring the independence of professional appraisers is the most viable and expeditious solution to restoring consumer confidence in local residential markets,” said Tim Forsythe, CEO, Forsythe Appraisals LLC, a 68-year-old national appraisal firm based in St. Paul, Minnesota. “That’s why we support the spirit of the agreement which is designed to ensure appraiser independence. However, we need to fully consider the potential ramifications. This agreement casts a very broad net.”

Forsythe noted that over-aggressive lending policies in the past few years created situations where appraisers around the country felt pressured to provide a particular value for a home or condominium in order to close the sale. From ‘tweaking’ the numbers to providing fraudulent information, these unethical and illegal actions have severely impacted the nation’s residential marketplace, he added.

“In light of all the pain being felt by the real estate industry, it’s time to recognize the importance of a good, independent valuation as a cornerstone of the buying and selling process,” adds Tim Forsythe, whose firm operates a staff-based model where appraisers report to their managers, not directly to the company’s clients.

Testifying on Capitol Hill last June, Alan Hummel, SRA, senior vice president and chief appraiser for Forsythe Appraisals and then-chairman of the Appraisal Institute’s Government Relations Committee, said many appraisers face pressure in mortgage transactions. “They are told to doctor their appraisals or else never see work from those parties again,” Hummel told the Senate Subcommittee on Housing, Transportation, and Community Development.

A recent independent study by the October Research Corp, sponsored by Forsythe Appraisals, found that 90 percent of respondent appraisers indicated that they felt pressure to raise property valuations to enable deals to go through, up 35 percentage points from levels reported in 2003.

“Appraisers, as the only independent party in a mortgage transaction, do not benefit from raising or lowering the valuation of a property, yet they face loss of employment unless they succumb to pressure to provide a fraudulent report,” said Hummel. “It is time to elevate the practices of many lending professionals and create a single standard for ordering appraisals,” said Hummel. “We need to aggressively enforce laws to punish bad actors.”

A Viable Solution

Restoring the independence of professional appraisers is the goal of the recent Cuomo agreement with Fannie Mae and Freddie Mac, which would create a new independent oversight body and code of conduct designed to remove undue influence from the valuation process. “This is one of the greatest, most dramatic reforms of the housing industry in the last 20 years,” Cuomo said at a recent New York press conference. “We believe as a group that this will be a significant and dramatically positive reform.”

The agreement is subject to revision, and Cuomo’s office will be accepting comments from industry sources and other interested parties through April 30.

Under the agreement – which followed a New York State investigation of lending industry practices – Fannie Mae and Freddie Mac will only buy home loans from lenders that endorse an appraiser code of conduct. The code would:

Establish requirements governing appraiser selection, solicitation, compensation, conflicts of interest and corporate independence.
Create a new entity, the Independent Valuation Protection Institute to monitor and study this area.
Create a new complaint hotline for consumers and appraisers to report any prohibited interference by loan officers, real estate agents and others.
Prohibit lenders from influencing an appraisal through coercion, inducements or other forms of pressure.
Require lenders to use an appraiser who is not employed, affiliated or otherwise connected with the lender.
The Impact

“We strongly believe this agreement will play an important role in reinforcing the value and expertise of independent residential appraisers,” said John Forsythe, SRA, president, Forsythe Appraisals. “There needs to be a very clear separation between those who have a vested interest in the outcome of the loan ordering the appraisal and the professional who provides that service.”

While there will be interpretations needed to clarify points of the agreement, the result will likely be some sort of restructuring of the appraisal industry in order to support the new standards.

“One of our long-held beliefs is the importance of creating a barrier that protects the providers of appraisals against undue influence,” said Tim Forsythe. “That way our appraisers can feel empowered to provide the best, most qualified and independent valuation of the subject property.”

Tim Forsythe noted that there are appropriate reasons for a buyer or lender to contact an appraiser, such as a request to consider additional comparable sales before determining the value. “That’s very different from an inappropriate request like saying, ‘unless you hit this value, you’ll never work for us again.’”

“Ultimately, it is the appraiser whose valuation remains attached to the loan – even if the mortgage broker goes out of business or the lender resells the loan,” said Tim Forsythe. “Appraisers understand they are accountable for their work, and the proposed agreement will go a long way to strengthening their independent role in the valuation process.”

 

 

 Going Once, Twice — Sold!

With a small-town real estate market hobbled by factory and store closings,
Greg A. Storey used an auction to close a sale for almost double the market price.

BY MICHELLE HOFMANN

THE CHALLENGE: The house is located in Eads, a town with a population of about 700, and is about 90 miles from Greg A. Storey’s office in Juno, Colo. In 2005, Storey,  owner of Heart G Auction & Realty, got the less-than-perfect listing. He says the home had asbestos siding, electric wall heat, and foundation problems. But the biggest obstacles were the sagging housing market and plant closings that plagued the area.

“Eads is a small town that’s drying up,” Storey says. “Three homes were sold during 2005 in Eads. And with 12 homes for sale when I got my listing in November 2005, I was facing a market that basically had a four-year supply of homes for sale.”

Storey held one auction preview, with one attendee, prior to Thanksgiving. Then, right after Thanksgiving, the bus plant in Lamar, Colo. (about 30 miles south of Eads), which employed about 20 percent of the town’s population, announced it was closing. The same week, a major retail store that drew people for 100 miles to its location in La Junta, Colo., reported it too would close.

“With these two announcements, the entire area was in a gloomy mood and hopes for a real estate sale were rapidly diminishing,” Storey says. “And with no buyers and a house you would be lucky to get $6,000 for, it was obvious that no broker wanted to list the property and drive 60 miles round trip just to show it.”

So how did you overcome the challenge?

STOREY: I placed ads in the newspaper and posted signs and fliers promoting an auction for the property around the town. I also held a real estate auction preview two weeks before the actual auction that lasted about 90 minutes. It was attended by two people. I called the owner’s nephew in Oregon and informed him of the economic downturn in the area, and he said he would leave it in my hands to do my best. So as my wife and I drove to Eads to conduct the auction, held at the property Dec. 3, it didn’t look good.

How were you able to get it sold through auction?

STOREY: I ended up holding two auctions and one preview two weeks before the final auction. I had three bidders sign up for the final auction. The first was a man known for buying properties and renting them out. The other two bidders were the neighbors on each side of the property. The bidding started at $500. Nine minutes later I announced the property sold to the neighbor to the north at $9,950. We closed Dec. 30.

Is this what you expected the property to sell for?

STOREY: In checking the market, I learned that the two other almost identical homes that sold that year brought $4,000 and $5,000 respectively. So we got a good price for the home.

The person who bought the house had heard about the auction from the newspaper ads, signs, and fliers I posted in mailboxes and around town. He then resold the home to a young couple for $12,000. They invested a lot of money in the home, and it is reportedly now a town showpiece.

What do you attribute to closing the deal so quickly and getting such a great price?

STOREY: The house probably wouldn’t have sold, and not as quickly, without the auction process. The system and speed of auction marketing definitely drummed up enthusiasm with buyers and closed the deal quickly.

How did you get the listing?

STOREY: In October 2005, I received a call from the owner’s nephew. He lived in Oregon and was referred to me by a broker who had recommended me for a fast sale. The nephew said his aunt had a house in Eads but had to move into a nursing home in Ordway, Colo., and would never be able to live on her own again. The nephew had power of attorney. I had an auctioneer who I work with drive by the house and tell me about it. And I met the nephew at a truck stop and talked about my marketing strategy. He asked me what we had to do to start the process. I went to my car, got my laptop and my battery-operated printer, returned to the truck stop, pulled two tables together, set up my work area, wrote up the contract, and within 20 minutes, we were done.

How much did you spend marketing the home?

STOREY: The total advertising budget for the auction, with fliers, signs, and three newspaper ads, was $262.

How many times did you show the property?

STOREY: Three times. Once during the first auction preview and twice during the second.

How did you get started in real estate?

STOREY: I worked my way through college working in the livestock auction field in the 1970s. I became a certified auctioneer and started my own auction company in 2000, got my real estate license in January 2003, and started my real estate company in June 2005.

What lessons did you learn from this transaction?

STOREY: If anything, the experience taught me to not give up. I’m often asked to speak about how auctions work and my most successful real estate auction. Even though I have sold many six-figure properties at auction, I always find myself telling the story of the little house in Eads that bucked the economic odds and sold for almost double what everyone thought it would.

 

Last week we wrote about bidding wars over discounted homes in Cape Coral, Fla. But over on the Sunshine State’s east coast, the market is looking a bit more grim, at least according to this article in the Sarasota Herald-Tribune.

The article looks at the Sky Sotheby’s Fort Lauderdale real estate auction, which took place last Friday. Of 99 properties on the auction block, 67 had no bids. “This was a disaster,” says one broker quoted in the article. “They’re basically going to have to give them away.” Bidding on the first property, a waterfront lot in Miami Beach, started at $1 million. The auctioneer lowered the price to $100,000 — and didn’t grab one bidder because the buyers knew that there was an undisclosed reserve and the low bidding was therefore meaningless.

A few homes did generate interest, according to the article. Brownstones priced in the $500,000 - $600,000 range, garnered bids of between $230,000 - $275,000. But higher priced properties drew silence from the crowd. The article then goes on to say that deals were happening after the event and behind-the-scenes. Interestingly, the two examples mentioned are of foreign buyers — a European buyer made an offer “in excess of $17 million,” according to the article, on an “enormous” Mediterranean-style villa priced at $23 million. A Venezuelan bidder made a pre-emptive offer on a 20,000-square-foot nine-bedroom estate.

 

NAA President and Comments about Recession and Auctions: Auctions were only the medium of exchange

In  a recently held on-line national meeting, President Williams of the NAA was asked "Will and economic recession hinder or grow the auction industry?"

The President said the public does not fully understand the auction industry's relationship to ecoomic up and downs. "People say to us: 'Economic times are bad, so that must help your auction business'. I tell them that in times like this, the market is struggling to define reality becasue the sum of parts of the  economy are out of sync. Prices go down, but it has nothing to do with the auction industry. I've seen the price of Angus cows go from $1000 per cow to $300 per cow, and it had nothing to do with the auction industry. Auctions were only the medium of exchange. We don't have anythng to do iwth the economy being good or bad. We are in a time now when opportunities are unlimited for the auction industry."

If you've got questions about auctions, why not send them to Nicholas Varzos at Nicholas@MyNextAuction.com

 

Foreclosure Activity Decreases 4% in February

Mar 14th, 2008

IRVINE, Calif. – March 13, 2008 – today released its February 2008 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 223,651 properties nationwide during the month, a 4 percent decrease from the previous month but still a nearly 60 percent increase from February 2007. The report also shows one in every 557 U.S. households received a foreclosure filing during the month.

“The 4 percent monthly decrease this February was similar to the 6 percent monthly decrease we saw in February 2007,” said James J. Saccacio. “However, the year-over-year increase of 60 percent this February was significantly higher than the 19 percent year-over-year increase in February 2007, indicating we have still not reached the peak of foreclosure activity in this cycle.”

Nevada, California, Florida post top state foreclosure rates
Nevada continued to document the highest foreclosure rate among the states, with one in every 165 households receiving a foreclosure filing — more than three times the national average. Foreclosure filings were reported on a total of 6,167 Nevada properties during the month, up 1 percent from the previous month and up 68 percent from February 2007.

California registered the nation’s second highest state foreclosure rate in February, with one in every 242 households receiving a foreclosure filing during the month, and Florida registered the nation’s third highest February foreclosure rate, with one in every 254 households receiving a foreclosure filing during the month. Both states documented foreclosure rates that were more than twice the national average.

Arizona foreclosure activity was up 6 percent from the previous month and nearly 210 percent from February 2007, helping the state’s February foreclosure rate — one in every 264 households received a foreclosure filing during the month — rank fourth highest in the nation.

With one in every 305 households receiving a foreclosure filing in February, Colorado’s foreclosure rate ranked fifth highest among the states despite a 1 percent decrease in foreclosure activity from the previous month. The state’s foreclosure activity was still up nearly 27 percent from February 2007.

Other states with foreclosure rates among the nation’s 10 highest were Michigan, Ohio, Georgia, Indiana and Tennessee.

California, Florida, Texas report highest foreclosure totals
Foreclosure filings were reported on a total of 53,629 California properties in February, the most of any state despite a 6 percent decrease from the previous month. The state’s foreclosure activity was still up 131 percent from February 2007.

With foreclosure filings reported on a total of 32,447 properties, Florida documented the second highest state total in February. The state’s foreclosure activity was up more than 7 percent from the previous month and more than 69 percent from February 2007.

Texas documented the third highest state total — 12,261 properties with foreclosure filings — despite a nearly 17 percent decrease in foreclosure activity from the previous month and a 1 percent decrease in foreclosure activity from February 2007. With one in every 736 households receiving a foreclosure filing during the month, the state’s foreclosure rate ranked No. 17 among the states and was below the national average.

Michigan and Ohio both reported more than 10,000 properties with foreclosure filings in February. Other states in the top 10 in terms of total properties with foreclosure filings reported were Arizona, Illinois, Georgia, Colorado and Nevada.

California and Florida cities dominate top metro foreclosure rates
California and Florida metro areas accounted for nine of the top 10 metro foreclosure rates in February. The Cape Coral-Fort Myers, Fla., metro area documented the highest February foreclosure rate among the 229 metro areas tracked in the report, with one in every 84 households receiving a foreclosure filing — 6.7 times the national average. The other Florida metro area in the top 10 was Fort Lauderdale, which ranked No. 10.

The Stockton, Calif., metro area documented the second highest metro foreclosure rate, with one in every 87 households receiving a foreclosure filing in February. Other California metro areas in the top 10 were Modesto at No. 3, Merced at No. 4, Riverside-San Bernardino at No. 5, Bakersfield at No. 7, Vallejo-Fairfield at No. 8 and Sacramento at No. 9.

Las Vegas was the only metro area in the top 10 that was not in California or Florida. With one in every 131 households receiving a foreclosure filing in February, the city’s foreclosure rate ranked No. 6..

 

Auctions catch on as sales route for all types of property

AVRUM D. LANK
Milwaukee Journal Sentinel

MILWAUKEE — As 2007 wound down, David Leszczynski faced a challenge. After spending more than $10 million and three years converting a 1930s Art Deco skyscraper to a downtown condominium project, some of the units were still empty. With real estate sales falling, credit tightening and the economy slowing, Leszczynski knew he had to think creatively to find buyers.

Without doing that, he said, "you could sit and wait a long time" for the building to fill. His solution: an auction. Auctions have existed for centuries and are commonly used to sell foreclosed or repossessed real estate. In the Southern U.S. and in parts of the West Coast, they are becoming more common to sell real estate of all types.

It's unusual for Milwaukee developers to auction condos, said the agent for Leszczynski's Wisconsin Towers. "But it is something that we are starting to see a little bit more of," he added. "In today's real estate market, you have got to be proactive," Leszczynski said. "I am convinced it is a good way to let the public set the price."

Craig A. Muri, president of the condo board, also is behind the effort. "I think it is a really good idea, very creative," said Muri, who, with his partner, has owned a unit in the building since June. "With the market the way it is right now, you have got to look to see what your options are and get out of the box." Muri understands the auction results will affect the value of all the units in the building.

"All of our values are going to stay relatively the same. I can't imagine the units are going to sell for much less than 90 percent of list price," he said. "Obviously value will go down, but I think values have gone down given the way the economy is now." Periodically, single-family homes not in foreclosure will be auctioned off, said Michael D. Holloway, owner of Homebuyers Associates, a real estate agency in Milwaukee that represents only purchasers. But he is not aware of other condos being sold that way.

As for bidding at a condo auction, "on the surface I would just have a concern because it is a new approach," Holloway said. "If it is a true auction, if there is bidding against people, then emotion comes into play, and I am one for buying on information and not emotion." Also, auction deals often do not include contingencies for things such as inspections or the sale of another property, so it's important to do some homework, he said.

It is unusual for an owner-occupant to auction a house, said Dentice, but some companies do. Real estate auctions are the fastest-growing part of the auction business, said Chris Longly, public affairs manager for the National Auctioneers Association of Overland Park, Kan., although he could not say how much of that growth is due to foreclosure sales.

A quick, clean deal is what appeals to sellers, he said. "The market has changed," he said. "People want things now."