Utah real estate: The word 'foreclosures' can conjure unpleasant images, but for the right buyer, they are terrific bargains

DRAPER - The two luxury homes that sit side by side in this neighborhood of massive ramblers aren't supposed to be on the brink of foreclosure.
    But these days, they have plenty of company. As a recent tour of the Salt Lake Valley revealed, foreclosed homes are on the market all along the Wasatch Front, in all price ranges - all the way up to multimillion-dollar mansions.
    Many, like these spacious two-story mini-mansions in Draper, were purchased at the height of the housing market boom. Their owners had built not only a dream home but a second, slightly smaller one, next door as an investment. And why not? For more than three years, homes, especially expensive ones, were flying off the listings at inflated prices, aided by a steady stream of exotic loans and too-loose lending standards.
    But then last summer, all that came to a screeching halt. Almost overnight, lenders throughout the country, reeling from the nation's credit crisis brought on by unpaid loans, tightened loan standards, making it more difficult - in some cases impossible - for many to qualify for mortgages. Home sales along the Wasatch Front plummeted almost immediately and prices, especially for the high-end homes many can't afford without exotic financing, soon began to follow.
    "If the market would have just kept going up, these people would have done great," said Randall Wall, branch broker with Equity Real Esate in Salt Lake City as he walked through an unlandscaped yard littered with weeds and kids' toys. But the market locally did just the opposite, and to make matters worse for the owners of the mini-mansions in Draper, both spouses worked in the housing industry and were separating.
    Wall does a lot of work in foreclosures, a growing problem for Utah. In fact, RealtyTrac, a service that tracks filings nationally, considers Utah one of the foreclosure capitals of the United States, weighing in at No. 10 nationally. The firm estimates that one in 600 households in the state is in some stage of losing a home because the owner is behind on loan payments. The fear is that Utah's foreclosure rate could mushroom in coming years as scores of adjustable-rate loans reset at higher rates, triggering higher payments that borrowers cannot afford.
    As listing agent, Wall is trying to help the owners of the Draper homes arrange for short sales on both properties. That means he's trying to get the banks that hold the mortgages to accept less than they are owed.
    The loan on the larger of the two homes is for more than $900,000. The property probably will sell for at least $100,000 less than that; one cash offer came in at $400,000. The second home has a $650,000 loan; it probably will sell in the $500,000 range.

    Plenty of pain: But owners of high-end homes purchased at the height of the market aren't the only ones feeling the pain these days.
    In the Rose Park area of Salt Lake City, a small rambler sits empty, a broken front window boarded up. Pretty much anything that could have been carted off - even the refrigerator and wood stove - are long gone.
    It had sold for $146,500 about three years ago; it appears as though the buyers put no money down and used an adjustable-rate loan that adjusted upward in January.
    The bank that had to take back the 1,700-square-foot, four-bedroom, two-bath house after the owners stopped making payments have listed it at $169,000.
    Wall, who also invests in foreclosures, said if he were trying to buy the property, he'd probably offer $100,000. Would the bank accept that little? "Maybe. You never know."
    Josh Christensen, an investor who works with Wall and is related by marriage, pondered the question from the kitchen. The bank might. The home isn't in bad shape for a foreclosure, but it does need work inside and out.
    Wall said the worse the condition, the lower the offer. "For the right price, a lot of problems disappear," he said, smiling. Added Christensen, "People say location, location, location, I say it's all about price, price, price."
    But sometimes, even a low price isn't enough.
    A few blocks away in Rose Park, another foreclosure sits on the market. This one, also with a broken window, is listed at $120,000. The 1,380-square-foot house built in 1908 is pretty smelly and grimy, with a rather large roach attempting to scramble out of the home's only bathtub.
    There's also a scary-looking stairwell leading to a basement that no one seems to want to venture down.
    Wall said the house was purchased in June 2007 for $121,600; the owners had defaulted on their loan by April of this year.
    He said he would counsel a prospective buyer to offer $60,000 or $70,000.
    This is why foreclosures have a reputation for being quirky transactions. The last thing banks - which are in the business of lending - want to do is have to sell a property. They prefer to get rid of foreclosures quickly, but don't want to give them away.
    "The worst thing they can say is, 'No,' " Wall says.
    And they do, said mortgage lender Glen Ogden. Ogden, who has had to deal with several foreclosures in the past year in his company's loan portfolio, said he starts by establishing a current market value for the property, which can be much lower than the mortgage.
    "If the neighborhood is full of foreclosures, then I may price it more aggressively to make sure mine's the one that goes first," Ogden said.
    He said he will take lower offers depending on how long the home has been on the market and how much competition the property has in the neighborhood.

    The shape it's in: Condition is another factor. A third foreclosure, in the Glendale area of Salt Lake City that listed at $155,000, is actually in pretty good shape. Here, the damage is limited mostly to a broken window held together with masking tape, a few holes in the walls and other cosmetic issues. The neighborhood also is much nicer than the first two foreclosures in Rose Park, and a thorough cleaning would do wonders for its appeal, inside and outside. It has a fenced front yard and backyard.
    What happened here probably happened at the other two properties, Wall said. A low- to moderate-income family that might have been considered too high-risk for a loan five years ago but got the green light under the prevailing loose standards of recent years bought the home. Perhaps it did so with a high-rate loan, maybe even one with exotic terms the borrower didn't fully understand.
    Maybe the loan reset at a higher rate, creating a payment beyond family's ability to pay. Maybe the borrower lost a job or had an unexpectedly high medical bill.
    In any event, the buyers who made their purchase in March 2007 for $166,000 were in default by November.
    As is often the case in foreclosures, devastated homeowners take anything of value as they exit, Wall said, leaving the property pretty much as they lived in it. Some depart months earlier than they have to, not realizing that it takes months of missed payments for the bank to boot them out. Others leave in the middle of the night, away from the judgmental stares of neighbors.
    But some, angry that their homes slipped away, do serious damage to the properties, such as punching holes in walls, pouring cement down toilets or spray-painting walls. Because conditions vary, asking and selling prices do, too.

    Some nice ones: Not all foreclosures lack TLC.
    Arriving at a newer two-story home in West Jordan, there are far fewer hints the home is a foreclosure. Except for a large brown patch in the front lawn, the house with a stone facade really has only a few cosmetic problems, such as a small weathered deck. It could also use some cleaning, but all in all, it's in move-in condition.
    Built in 2004, the property tells the story of the Wasatch Front's housing boom and recent fall.
    In July 2005, the home sold for $224,500, Wall said. In January 2006, it sold again, this time for $249,000. Yet another owner bought the home in May 2007 for $290,000. As is the case with many foreclosures, the last owner eventually ended up "upside down" in the property, which meaning he or she owed more than its market value.
    Today, the house is listed by the bank for $269,000. "They'll be lucky to get $225,000," Wall said as he walked through. "There's just a lot of properties like this for sale right now. And buyers aren't stupid. They want a deal."
    On to Sandy, to a foreclosure listed for $495,000. Driving up a rather steep and long driveway, the first thing that comes to mind is that this home must have beautiful views.
    The expansive vistas out large windows don't disappoint. But the house is not in move-in condition by any measure. It looks as if someone bought the 3,300-square-foot, 1960s-era structure, started to gut it and walked away. There are dangling electrical wires and piping, and some walls and stairwells have been partially ripped out. The lone outbuilding next to the house - a garage? - is crumbling.
    Wall estimates any buyer would have to put in at least $150,000 on pricey renovations - such as a new kitchen, fixing electrical and plumbing issues, adding central air and heating, and knocking out a few walls.
    "This could be really nice," he said as he looked around. "You could always offer $200,000 and see what happens."
    lesley@sltrib.com


    Tips for buying a foreclosure
    * This is a purchase you might not want to tackle by yourself. Strongly consider enlisting the help of a real estate agent who knows this aspect of the market well. Finding foreclosures yourself can be difficult because many aren't identified as such. Some don't even have for-sale signs out front.
    * You may get a great deal because banks are eager to unload these properties. But banks aren't going to give away a house and will try to get as near market value as possible. Foreclosures in the worst shape often go for the lowest prices.
    * Don't skimp on a home inspection. It's always buyer beware, perhaps even more so with a property in which you can't contact the former owners. Many of these properties require some amount of money in renovations.
    * Be prepared to face some hassles. Buying short sales (properties in which a homeowner is behind on payments but not yet in foreclosure) or foreclosures can be a test of patience. Negotiations can be time-consuming.

    Are you falling behind in your mortgage?
    Various groups can help homeowners avert foreclosure. Go to www.hud.gov/ foreclosure/index.cfm and click on "Contact a HUD-approved Housing Counseling Agency."

Article Source

Featured Sponsors:

Advertise your business here!
Signup now and be featured on this page. Upload your photo and link to your website! Sign up NOW!

ForeclosureListingsUT

Utah Related Articles

Utah real estate: The word 'foreclosures' can conjure unpleasant images, but for the right buyer, they are terrific bargains

Featured Sponsors:

Related News and Articles: