Friday, May 23, 2008

Hard times’ silver lining

Foreclosure specialists finding plenty of work as housing market buckles

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Kaleigh Kulp⁄The Gazette
Chris Guldi stands in a foreclosed Waldorf property that was damaged by fire and squatters. He’s listing it at about $80,000 — meant for investors looking for a fixer-upper.
Chris Guldi wasn’t nervous about approaching the house whose occupants have probably ‘‘hit rock bottom.”

He’s used to it. He’s a pro, a specialist in real estate owned transactions — mostly foreclosures these days.

It was a recent late afternoon when the owner-broker of Keller-Williams Realty in Waldorf and president of the Southern Maryland Association of Realtors got a call from National City Bank. Another property was being foreclosed on and Guldi was to see if the house was still occupied, to offer a broker price opinion of its value, to assess any improvements that needed to be done, and to put it up for resale. If the house was occupied, he needed to inform the homeowners they had to leave.

The residents could then take a relocation assistance offer from the lender of $500 cash to be out in two weeks — a deal not every bank offers. Or they could stay and wait until the circuit court ratified the repossession, at which time police officers might have to force them out.

If there weren’t any occupants, Guldi would pick the lock and continue with the job he was hired to do. He doesn’t want to tell people how to break into a house, but his locksmith taught him how.

So when Guldi approached the Wakefield neighborhood house in Waldorf the next morning, the home appeared to be occupied, judging by a glowing porch light, a car parked in front of the house and drawn curtains. He didn’t know what to expect.

‘Three kids andnowhere to go’

Guldi has had some unusual encounters.

Once he picked the lock of an Accokeek house that had no electricity or water, only to find furniture blocking his entry and a man who had been living there running at him from the back of the house. The man later told him he had fallen behind on his bills and was a victim of a foreclosure rescue scam. Another man in Capitol Heights answered the door brandishing a handgun. He didn’t give Guldi much trouble, but Guldi later filed for a permit to carry a handgun, but was denied.

He’s heard many reactions from people when he shows up:

‘‘I have three kids and nowhere to go.”

‘‘I’m not leaving because I think God will help me save my house.”

‘‘I’ve been waiting for you for months.”

‘‘You never know what the experience is going to be like,” he said.

Guldi is one of many real estate agents nationwide who have been overwhelmed with listing real estate owned and bank-owned properties as the resale housing market has declined and foreclosures have drastically increased.

Though Guldi made such work his niche since he became a real estate agent seven years ago, he says many more have followed suit. The market for these properties has exploded, made possible by more bank repossessions that fail to sell for their mortgage balances at auction because home values are down.

This has created an opportunity for Realtors and contractors to find work even as the housing crunch contributes to a weak economy.

‘‘It’s always been my specialty. ... More people are getting into it. They think that’s what they have to do because they think they’re the only thing selling,” Guldi said.

Guldi often sends his contractor to a house before he goes, to check occupancy, change locks and make estimates — saving him the grunt work of initial contact with possible occupants.

‘‘Every now and then, I like to pick a lock. I don’t enjoy them if they’re occupied. If they’re occupied, you’re talking to someone who’s hit rock bottom,” he said.

In the past he’s sold from 15 to 20 foreclosure properties a year. In the last 12 months, he has worked 20 to 30 at one time and with as many as 25 different banks. But because he must pay out of pocket for all repairs and cosmetic measures needed to get the property ready for sale, this line of work almost broke him last year, he said.

‘‘It ramped up on us quicker than we could get reimbursed,” Guldi said.

He must wait 30 days to six months for reimbursement from the banks, which pay him when the property sells. The most he has spent to rehabilitate a property is $40,000.

‘A lot of peoplejumping into it’

Michael Krein, president of the National REO Brokers Association, said a real estate agent needs at least $100,000 readily available to break into this line of work. Taking over bank-owned properties isn’t for every real estate agent, Krein said.

‘‘It’s a very specialized field,” he said. ‘‘There is so much REO going around and there’s a lot of brokers getting into it now that don’t know what they’re doing. There’s a lot of people jumping into it, especially since the rest of the market’s dead in so many areas.”

Krein’s association acts as support for REO brokers and helps them find contractors, lawyers and other services.

A year or two ago, the association received about 100 membership applications a month. Now, it’s receiving about 300, most of which are rejected because the applicants don’t have enough experience. The group has 800 members nationwide who are selected by population in their areas of service, and experience.

‘‘It’s Realtors who’ve lost their regular business and said, ‘Hey, this sounds like a good idea,’” Krein said. ‘‘Most real estate agents are salespeople, not businesspeople. This is a business. Deadlines are deadlines. Most real estate agents do not adapt well to that. About 40 percent of our members are ex-military. They understand deadlines and understand if something goes wrong it’s their own fault.

‘‘It takes a certain kind of person to clean out a crack house. And sometimes that happens. They tend to be severe type-A personalities — probably the opposite of what makes a good real estate agent. They should go to work for an REO broker who knows what they’re doing first.”

Going to any old real estate agent for foreclosure work is like ‘‘going to a podiatrist when you need brain surgery,” Krein said.

The rise in foreclosures has also created work for other industries, including title companies and foreclosure lawyers. Guldi said that although the banks take title when properties foreclose, they hang onto them for such a short time that the foreclosure deed and the new owner’s deed when they sell the properties are often recorded at the same time.

‘‘It generates some business for us,” said Michael Whitson, owner of Tri-County Abstract Inc., a title company in Leonardtown.

‘‘We’re at the bottom of the food chain. It’s just another transaction for us,” Whitson said. ‘‘We’re seeing more of those and my impression is they try to sell them in the interim and haven’t had to take the title yet. If they can avoid that, it saves them money.”