Net zeroes in on foreclosures
With foreclosures rising nationwide, can the average house hunter compete against professional investors for a good deal with no hidden land mines? A new Web site may help.
Seattle Times business reporter
Hoping to scoop up a real-estate bargain, Chris Matty attended a foreclosure sale. He didn't land the house. But he did come away committed to improving the system.
The result is Bellevue-based ForeclosurePoint.com, which launched its beta version six weeks ago.
The Web site provides free access to foreclosure addresses as well as up-to-date auction status for each property, title and lien data. And it offers buyer financing by partnering with StoneCap Funding in what has traditionally been cash-only affairs.
Local now, ForeclosurePoint plans to go national in the summer, riding the national spike in foreclosures and capitalizing on the public's interest in landing a real-estate bargain.
When Matty attended that 2005 foreclosure auction, he was struck by several things.
A home's auction date is public information, but there's no guarantee the house will still be for sale on that date and no easy way to know if it's been postponed.
Numerous Web sites offer fee- or subscription-based data on national or regional foreclosure properties. Some include information on tax liens, bank repossessions, bankruptcies, for-sale-by-owner properties, investor advice and links to real-estate agents. Here is a list of some of those sites:
There was no information on how much was owed on a house and for what — a potential land mine for any buyer. There also was no way to gauge what a property was actually worth.
As a result, foreclosure sales overwhelmingly have been the province of professional investors — those who know where to dig up the missing information — and not of novices simply hoping to snag an affordable place to live.
"The process disturbed me so much," recalled Matty, the Web site's chief marketing officer. "The auction was in 2005, and the process was 1940s style."
As he stood that day on the steps of the King County Administration Building, where foreclosure auctions are held every Friday morning, he couldn't discern who was bidding, nor clearly hear the bids over the sound of passing buses.
But he thinks the house he wanted was worth $650,000 and sold for about $500,000.
Company: DepotPoint, a Bellevue technology-services company founded in 2005 that builds real-estate tracking technologies, created ForeclosurePoint.com.
Chief executive: Prakash Kondepudi. Beginning in the mid-1980s, he developed core technology for merchant-payment systems. More recently,
he was executive vice president of InfoSpace and headed its online-payments business, Authorize.net.
Chief marketing officer: Chris Matty, a former InfoSpace executive.
How do they make money: Basic information is free; more detailed property report costs $39.95; one-month subscription is $79.95.
Future plans: Expects to go national in the summer.
"Someone got a deal. The bank got its money, but who got wiped out was the owner," Matty said. "If the process was more open, there would have been more people more interested in buying."
And that could have spared the owner such a deep financial loss.
Offering richer data
With foreclosures rising, many Web sites have sprung up in response to public interest. The number of foreclosures reported nationwide soared 42 percent in 2006 to 1.26 million, according to RealtyTrac, an Irvine, Calif.-based company that tracks foreclosures.
Most of the existing sites only give basic property information, such as the address, the auction date and a bit of description.
ForeclosurePoint's aim is to give much richer data and services, said Prakash Kondepudi, chief executive of DepotPoint, ForeclosurePoint's parent firm.
With that, buyers can go to the auctions and be better prepared to bid.
But delivering on that aim has been a challenge, Kondepudi said, that began with understanding foreclosure law and compliance elements. The rules are very technical; each state has its own.
"It's been a challenge to come out with a trustworthy site," said Kondepudi.
Some of the data on ForeclosurePoint site is free, including a basic list of foreclosures and a primer on how they work.
More detailed information is available to the public for $39.95; that money buys a report on one property. A one-month subscription to see details on all properties is $79.95.
The site currently has information on 800 foreclosed properties, be they a house, condominium or land, in King, Snohomish, Pierce and Kitsap counties. It shows the financing available through StoneCap that goes up to 80 percent of the auction price for 180 days on most properties, and includes hazard insurance.
• Property's address, legal description, tax information, physical characteristics and an exterior photo.
• Auction date, time, location and updates on postponements.
• Sale history, loan amount, amount in default, liens and their status.
• Title search, exterior inspection reports.
• Estimated market value and estimated maximum bid.
And, it links to real-estate agents with foreclosure experience at Winnow Properties, a RE/MAX Northwest Professionals entity in Kirkland.
Mitch Lomax, a Winnow agent, sees his role as both guiding buyers through the process and injecting a dose of reality.
"We very much give a sober teaching about this business," Lomax said. "We tell them they need two things to be successful: patience and tenacity. If you think you're going to get rich overnight, you're in the wrong business."
Someone who buys 10 properties will get a reasonable rate of return on seven, hit a home run on two and suffer an "absolute nightmare" on the remaining one, Lomax estimated.
Windermere agent and real-estate investor Dick Pelascini is not affiliated with the new site, but he's familiar with it.
ForeclosurePoint's greatest strength is its depth of current information, he said. "In the past, it's been a labor-intensive process. We had to do all our own research."
Pelascini is particularly enthusiastic about the lien information, which he says can be the difference between buying a diamond and buying a dog.
Until ForeclosurePoint made this information available online, buyers had to go to the courthouse and sleuth it out themselves.
Average total monthly foreclosure filings for King, Pierce and Snohomish counties: 650
Average number in these three counties that go to auction each month. (Some sell before auction; about 75 percent are postponed.): About 90
Of the roughly 90 foreclosed properties that sell each month:
$217,000 is the average bid.
$350,000 is the average market value.
Up to two-thirds of properties sell within $10 of the opening bid.
"Liens are important because they tell you what you're buying," Pelascini said.
Take, for example, a three-bedroom Maple Valley house scheduled to go to auction Friday. ForeclosurePoint estimates the opening bid will be roughly $58,615 for a home worth $338,000.
But anyone who buys it for $58,000 will find themselves saddled with an additional $308,862 in debt — the total for three judgments, one lien and a mortgage.
This is because what's in foreclosure is a $51,000 second mortgage that ranks sixth behind the other debts. Whoever buys this house must pay off those debts or lose the property.
Still, having ForeclosurePoint's data is no insurance against running into other problems, Pelascini cautioned.
"This is a risky business. You're buying homes a lot of times sight unseen on the inside. You're not buying them subject to inspection," he said.
It's a lesson Pelascini knows from personal experience.
A high-end house he bought at auction was later discovered to have such extensive interior water damage that the floor joists, sheetrock and hardwood floors needed replacement. A leaky washing-machine hose had caused the damage.
The owners had noticed it but had no incentive to fix it since they were losing their home, Pelascini said.
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