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Anxious buyers vie for homes at auction at Riverside Convention Center
A fair with free food and homebuying advice
HOUSING: No investors allowed at this foreclosure auction
Inland Empire property sale for first-timers only
By ERIC WOLFF - ewolff@nctimes.com | Posted: April 23, 2010 7:56 pm
Click here to read this story on the nctimes.com website
Investors will not be allowed at the foreclosure auction Sunday at the Riverside Convention Center.
That alone should get the attention of prospective homebuyers searching for a lower-priced home in the current market.
But the auction, which will include about 110 homes from across Riverside and San Bernardino counties, also features unheard-of amenities for a foreclosure auction, like a thorough Web listing of the properties available, a guarantee that the homes have been or soon will be inspected, and assurances that each is well-enough maintained to qualify for any government-secured loan.
Prospective homebuyers at the Inland Empire auction on April 25
The organizers of the auction, the Carmel Valley-based New Vista Asset Management, are trying to build a business that makes it easy for first-time homebuyers to get houses where owners are most desperately needed.
"One of the things we saw out there in the market is (that) many first-time buyers, owner occupants, people who had federal assistance available to them, could not get (sellers) to consider their bids," said Jim Park, one of the company's two founders.
The boom years of the 2000s led to such extreme increases in home prices that many homebuyers couldn't get into the market without resorting to high-risk loans. So many potential buyers stayed on the sidelines, rather than gamble on a perpetually rising market. When those loans started to go bad, foreclosures skyrocketed and house prices plummeted 40 to 50 percent, according to the Case-Shiller Home Price Index.
Prudent homeowners thought they finally had an opportunity to get into the market. But even when pre-approved for loans, many homebuyers lost out to cash investors. Sellers preferred the speed and ease of cash transactions, even when the bids were lower.
Meanwhile, neighborhoods once filled with homeowners became pockmarked with abandoned properties.
Park and his partner, Gary Acosta, said they saw an opportunity to match the desire of people to buy low-priced homes with the need of these neighborhoods for stable homeowners.
The two formed New Vista in 2006 after long careers in community development and mortgage banking. The company works with major lenders to help them sell foreclosed properties, but its mission has always been about getting buyers into houses in neighborhoods that need it.
"We think it's important," Acosta said. "It's great to give people an opportunity to become part of the neighborhood and become owners. It adds to a more healthy environment."
Their rules rewrite the norms of foreclosure auctions.
A typical foreclosure auction is fraught with risks to the buyer: Lenders are trying to unload properties at any price, and buyers must accept them in "as-is" condition, meaning the homes could be ready for immediate move-in ---- or they could be rat-infested meth dens with cracked foundations. Good lists of the properties available in an auction are hard to find, and there's a big advantage to regular attendance.
Sunday's auction will offer a great deal more protection, Acosta said. The properties will be provided by government-backed loan giant Freddie Mac. New Vista and Freddie Mac agreed to locate properties in the Inland Empire that would qualify for loans with Federal Housing Administration backing, particularly ones that qualified for support under the Neighborhood Stabilization Program, a federal program intended to prevent neighborhoods wracked by foreclosures from falling into ruin.
That meant finding homes with a complete set of appliances and fixtures and in generally good repair. Freddie Mac and Fannie Mae both agreed to participate, even though it meant holding houses off the market for weeks as they located suitable properties, and possibly taking less money on the sale.
"We don't think, in point of fact, the give on our side is going to be that substantial," said Brad German, a spokesman for Freddie Mac. "It is one of our corporate missions to foster homeownership opportunities. We saw an opportunity to work with New Vista to strike a balance, minimize losses, while creating more stable communities."
Acosta and Park collaborated with auction giant Real Estate Distribution Corporation to run the auction. REDC put the homes on its website at www.auction.com/ie, with pictures and a wealth of data on the houses. They even held open houses on two weekends preceding the auction.
The auction will have two sections. At 9:30 a.m., a session will begin for buyers who are pre-approved for assistance through the Neighborhood Stabilization Program, a federally funded program for low- to middle-income homebuyers willing to buy a vacant home in specifically targeted areas. For this, 22 homes in San Bernardino will be on the block.
The second part, at 1 p.m., will open up 90 properties to bid for any first-time homebuyer who is pre-approved for a mortgage by any lender. These properties are in San Bernardino and Riverside counties, including several in Lake Elsinore, Murrieta and Temecula.
If all goes well, the pair hope to see hundreds of homebuyers on Sunday, and they hope to sell out the inventory. Then, if Freddie Mac and Fannie Mae agree, they want to replicate the model in other hard-hit areas, such as South Florida and Los Angeles.
And they have some cause to think it will go well: Park and Acosta said that at their first auction in Phoenix on April 10, they sold all 22 properties available.
"They did very well," Acosta said of the bidders. "It was a tremendous opportunity to purchase homes. There were tears in their eyes, they were hugging each other ---- it was a very emotional event to be a part of. We hope there's a duplication of that in Riverside."
Call staff writer Eric Wolff at 760-740-5412.