Banks no longer hide foreclosed properties
Lenders have always tried to be discreet when marketing their foreclosed properties for sale. They feared the associated stigma and the appearance that they made too many bad loans.
But amid an ever-worsening foreclosure crisis, it’s not exactly a secret that banks have become some of the nation’s largest property owners. And lenders are starting to shed their low-profile approach as their portfolios bloat with foreclosed properties and pressures mount to unload the real estate.
Many banks have launched their own Web sites, promoting their so-called REOs (real estate owned) for sale, and some are selling their bank-owned homes on live online auctions.
“They used to be much more private and quiet about their REOs,” said Fred DeFalco, an auctioneer and consultant in Boca Raton. “But at this point it’s a matter of what’s good for their business. They need the exposure to sell.”
When the real estate market started to deteriorate and a wave of homeowners across the U.S. began defaulting on their mortgages, much of the blame for the crisis was placed on banks for lending money to people who could not afford a mortgage. Lenders who had too many foreclosures were stigmatized as irresponsible and many lenders avoided discussing their REO problems.
But as banks collapsed and pursued government help, it became impossible to hide their large REO portfolios. And for many lenders, their survival depends on clearing their books of bad debt and selling off foreclosed properties.
Washington Mutual is one of the latest examples of lenders who became more open about placing REOs in the spotlight.
The bank, one of the largest mortgage lenders in the nation — now owned by JP Morgan Chase — a few months ago created a Web site with a big logo advertising “Wamu Bank-owned Properties” where it lists thousands of its foreclosed properties for sale.
Sara Gaugl, a spokeswoman for the bank, said Washington Mutual created the one-stop site in an “effort to make it easier and more efficient for potential buyers of residential real estate owned properties.”
The Web site, which according to Gaugl lists all of the bank’s REOs, is updated regularly.
Washington Mutual has about 420 bank-owned properties listed on the site for sale in South Florida. But the lender was careful enough to not make it easy for users to figure out how many properties the bank owns.
The site’s search engine allows only a search by city and does not provide a count on the number of properties that match the searched criteria.
Wachovia also launched an REO Web site about six months ago, according to Don Vecchiarello, a spokesman for Wachovia.
Wachovia, which has foreclosed on thousands of properties across the U.S., is a bit more timid. It placed a disclaimer on its Web site: “While we strive to ensure that every Wachovia mortgage customer has loan payments they can afford, we occasionally need to foreclose on properties. As a result, we may have Wachovia-owned properties for sale to prospective homebuyers.”
The disclaimer understates Wachovia’s foreclosure problems. Wachovia is one of many banks that lined up to get its share from the government’s $700 billion bailout package because of its mounting numbers of mortgages in default.
Wells Fargo, which acquired Wachovia last year, recently received $25 billion from the bailout package.
There only are 82 properties listed for sale in Florida on Wachovia’s Web site.
According to public records, Wachovia took title to at least 148 properties in Broward County alone since last year and remains the owner of about 107 properties in that county. It also owns about 100 others in Palm Beach and Miami-Dade counties together.
Vecchiarello said Wachovia only lists some properties — the ones that belong to World Savings Bank, which Wachovia acquired in 2006 and those that are valued at more than $250,000 — on the site.
“We outsource our other properties to third-party companies,” he said, declining to disclose the total number of properties owned by Wachovia in Florida.
REO listings on bank Web sites are not new. A few banks have done it for some time, but in many cases the links were buried deep inside the company’s main Web site and had little exposure.
“For lenders, the main focus of their business has never been to sell properties so you wouldn’t expect to log on to their Web site and see a big ‘properties for sale’ link,” said Daren Bloomquist of RealtyTrac, a site that lists properties in foreclosure. “It’s been a little bit of a process for lenders to come to the realization that this needs to be a little bit more of a priority to them.”
A spokeswoman for Wells Fargo, which now owns Wachovia, said the lender has not decided whether it will merge Wachovia’s REO site with Well Fargo’s site.
Wells Fargo has a partnership with Premier Asset Services, a lender servicing company, to list its REO properties online.
The Wells Fargo site lists about 2,100 REOs in Florida. About 690 of those are in South Florida.
The site has been operating for many years but has been getting an increasing number of hits since last year, spokeswoman Debora Blume said.
Wells Fargo and other lenders declined to disclose traffic figures for their REO sites.
Other banks that list their REO properties on their Web sites for sale include Countrywide, Bank of America, CitiBank, Indymac and HSBC.
But while the sites are up and operating, many people in the industry aren’t aware that lenders have REO sites. That includes Realtors who are listed as the selling agents for a particular property that is advertised on the bank’s site.
The problem is that while banks appear to be embracing their new role as property owners with a lot of inventory to sell, they are overwhelmed.
Banks that have REO sites don’t do enough marketing to promote their sites, said Anthony Segrich, an REO manager at Boca Raton-based Foreclosure.com, which sells REO listings online.
“We talk to a lot of a lenders who have considered creating their own REO sites but we tell them just because you build a site doesn’t mean it’s going to attract anybody,” Segrich said.
Potential buyers normally go directly to brokers who specialize in foreclosed properties or to Web sites that list foreclosures from all lenders, he said.
But Segrich said lenders have been trying to improve their real estate marketing skills. Some lenders have recently started to ask that a link to the bank’s Web site be posted with the properties that are listed on Foreclosure.com. Although lenders don’t deal directly with buyers, they want to drive traffic to their own REO sites.
Last year, Premier Services of Wells Fargo contracted with Foreclosure.com to promote its listings.
“Lenders have been more proactive,” Segrich said. “The truth is out there, and the stigma is less than it used to be so now they are working towards solving the problem” Segrich said.
Bloomquist, of Realty Trac, said lenders and the companies servicing the loans not only have been more open and more willing to share information about their foreclosures but they also have been looking for other creative ways to sell their REOs.
“Before all of our information came just from public records,” Bloomquist said. “Now we are seeing lenders who are voluntarily contacting us to provide more information like their asking price, the agent’s contact, the auction date. They are definitely more open because they want to promote their properties.”
Bloomquist said various lenders have recently listed REOs for online auctions, similar to Ebay auctions, on Realty Trac.
The auction usually lasts for a few days. Sellers list the property with starting prices, and bidders can place their bids online until the last day. If there is no reserve price, the property is sold to highest bidder on the last day of the auction. In these cases, the starting price on the property is normally higher. When sellers have a reserve price, which is the minimum acceptable offer, they can reject the offer from the highest bidder if it is less and begin a new auction. The point is to draw attention to the property, DeFalco said.
Chase Home Finance has a three-bedroom Miami house that sold for $400,000 in 2006 being auctioned on the site with a starting bid of about $7,000. The auction ends on Jan. 31.
A Palm Beach Gardens home that is under the name of Deustche Bank also is listed for an online auction with a starting bid of $9,000. It sold for $265,000. Deutsche foreclosed on it in July of last year.
Deutsche Bank owns about 1,000 properties in Miami-Dade County alone, according to county records, but the bank says it is a trustee on the properties and was not the direct lender.
The bank “holds title to the loans for the benefit of mortgage securities investors, which typically include public and private pension funds as well as mutual funds held by the public,” according to an e-mail from a bank spokesman.
As for the regional and local lenders, while they also have become more proactive in trying to sell their foreclosed assets, they have yet to start listing properties for sale on their Web sites.
“They don’t have as many REOs as the larger banks so they can use different strategies,” DeFalco said.
DeFalco, a long-time South Florida auctioneer, said he has been consulting for local and regional lenders and helping them develop strategies to unload their REOs.
“They are definitely trying to get creative, but they are lost,” DeFalco said. “Look at the Washington Mutual site, it’s a great idea but no one knows it’s there. Banks don’t know how to market real estate.”
But they are trying and they are past the phase of denial, he said.
“I was having dinner with some other bankers the other day and they were all openly talking about their REOs and how they were dealing with them — that’s something you didn’t see before,” DeFalco said.
Despite the new era of openness, some local and national banks did not return calls requesting comment for this story.
Daily Business Review - Polyana da Costa - January 22, 2009