Who profits from foreclosures?
Hundreds were at Manhattan's Sheraton New York Hotel on January 29 for an auction of bank-owned foreclosed properties.
February 7th, 2011
06:41 PM ET

Who profits from foreclosures?

By all accounts, the nation is still in the midst of a foreclosure crisis. In 2010, foreclosure activity increased in 149 of the nation's 206 metropolitan areas with a population of 200,000 or more, according the foreclosure tracking company RealtyTrac. Last year, more than 2.8 million homes in the U.S. had foreclosure filings.

But one man's loss is another's gain. Foreclosed homes are often up for sale at bargain prices. Some businesses and property owners have used that to their advantage and are finding ways to turn a profit on properties that have depreciated in value and have been repossessed by banks.

Auction.com held more than 600 auctions of foreclosed properties last year. "It's truly what we call the perfect storm of opportunity," said Trent Ferris, the company's vice president of auctions.

On the last Sunday in January, a few hundred people filled a ballroom at a hotel in Midtown Manhattan to bid on more than 140 foreclosed homes in New York, New Jersey, Connecticut and Pennsylvania. As an auctioneer called out for bids at a blistering pace, the homes sold for a fraction of their fair market value. Each auction took about one minute, and Auction.com received a fee of 5 percent of the sale price on each house.

"At this particular point in time, nothing good comes from the empty house that's sitting there," Ferris said. "So by giving people the opportunity to buy at auction price to turn that empty house back into a home is absolutely phenomenal."

Click the audio player to hear the full story:

You can also listen to the CNN Radio Reports podcast on itunes or subscribe to the podcast here.

Post by:
Filed under: Auctions • Economy
soundoff (104 Responses)

    problem is that everyone is living paycheck to paycheck now and only people that have money is the rich people we bailed out..

    February 7, 2011 at 6:47 pm | Report abuse |
    • FredinVicksburg

      You have to understand the game plan. The banks could have renegotiated the loans for greater than the auction price. Instead they give the properties away at a fire sale price, then get a deficiency judgments against the people who held the mortgages saying that they still owes the money. Something wrong here. I have a young friend who is caught in the middle of this mess.

      February 7, 2011 at 11:27 pm | Report abuse |
    • AZDarkblade

      They should allow people to trade properties before they lose everything. How is it humane to take family after family through this when some who did not engage in the housing 'get rich quick or live like a millionaire when you're a convenience store clerk scam' ended up losing their jobs when the global economy tanked. They were innocent victims of others greed. I am sure that feels really great. That resale through auction even happens is SICK. Who the hell is able to qualify for a loan anymore?

      February 7, 2011 at 11:33 pm | Report abuse |
    • brown

      So why do you keep re-elected them? Stop complaining and reap the rewards of your indifference!

      February 7, 2011 at 11:51 pm | Report abuse |
    • AreYouKidding?

      People who borrowed money, and bought houses when they were priced higher DO owe that money. Why should the lender, who shelled out the money for that property, have to eat the loss? Why should the person who bought at that price, only to see it fall, just get a pass? The fact that the collateral fell in value should NOT mean that the person who borrowed that money just doesn't owe it anymore. It's nonsense like that, along with government interference in backing loans in Fannie/Freddie and letting people deduct interest payments that ballooned up the housing market in the first place.

      February 8, 2011 at 2:01 am | Report abuse |
    • Agustin

      When the investor/banker forecloses on a house FDIC pays the loss back to the bank. So in that case the bank actually gets all of the money right away and not have to wait 15, 20 or 30 years as they would have to if they had re-negotiated the loan or done a short-sale. that gives an incentive to the banks to foreclose in as many properties as possible. The more they foreclose on properties the more they drive prices down causing more foreclosures and collecting more money from the FDIC right away. it is called a Loss Share Agreement. and it was done by Tim Geithner at the same time that the bailout was done. all in an effort to save the financial system. it really SUCKS. we all have to pay the banks when they foreclose on our homes. who wins? the banks and the lawyers who losses? we all do, all of us who pay taxes, because tax money is what is being use to pay the banks when they foreclose on our homes..

      February 8, 2011 at 3:55 am | Report abuse |
    • NothingButTheTruth

      People need to realize that Banks, and US GOVERNMENT NEVER LOOSE MONEY PERIOD. The system is designed that way. Do your research. Banks where giving mortgages to people who THEY KNEW couldn't pay it back,and the Government knew this but did nothing, and that's because THE BANKERS run the country, not the government. In fact Wall street was giving Mortgages out, and betting that people would default. How could they loose?? Its true that people who cant afford a home, shouldn't be trying to purchase until there capable of doing so, but The Bankers are evil for taking peoples money, and then taking there home, then getting bailed out with there tax dollar, while betting, and gaining huge profits that those same people would default. Pure Evil. The real criminals are the government and Bankers So, 'WHO PROFITS FROM FORCLOSURES"....THE BANKS

      February 8, 2011 at 5:10 am | Report abuse |
  2. banasy

    Now THIS is the perfect blog to bring in the Tea Party debate in!

    Judging from my neighborhood, NOBODY is profiting from foreclosures, some of these houses have been sitting empty for a year! Not even the banks are profiting...but that's OK, because I'm sure there will be another bailout for them.

    And as one of the families who live paycheck-to-paycheck, we can't buy a foreclosure; even the occupied houses have been up for sale forever...

    Who profits? I give up...who?

    February 7, 2011 at 8:39 pm | Report abuse |

      People like me profit. I am a Vulture. I bought a foreclosed home and laugh at you simpletons!

      February 7, 2011 at 11:24 pm | Report abuse |
    • neozen666

      i own a business, i see families day in and day out on the edge of losing everything. these peoples lack of expendable money is hurting my business to the point where i am on the verge of losing my home and my business. the job market is dead in my area.
      i do not care what the news says about the job market is looking better.. im living proof and i have 2 eyes that see's whats going on. and i will tell you its not getting better.
      my girlfriend looked for a new job from april to dec. to get a job where she is working 5 hours a week for 7.25 an hour.
      i cant believe the banks would even forclose on people after they were bailed out by the peoples money.
      as soon as i am in a position to be done with banks i am 100% finished. my business i already only deal in cash.

      February 8, 2011 at 5:03 am | Report abuse |
    • 3RiversGuy

      The legal foreclosure paperwork factories are profiting from the foreclosures.

      QUOTE Another piece of the foreclosure-scandal puzzle involves a case mentioned in a recent article in the South Florida Business Journal, which describes an attorney with a large firm that specializes in foreclosures, “handling thousands of cases per month.” Florida Attorney General Bill McCollum. is investigating the firm of David J. Stern and three other firms, too. Recent depositions from former employees paint a picture of a rapid-growth, foreclosure mill. UNQUOTE See http://www.bankruptcyhome.com/bankruptcyblog/2010/10/21/of-foreclosure-factories-and-courtroom-smackdowns-a-judge-wiped-out-debt/

      February 8, 2011 at 3:45 pm | Report abuse |
  3. AverageAmerican

    Bingo Ruffnutt. Dumbocrats are great at holding up little african babies and telling us they feel our pain but really they couldn't help the little guy who just got laid off after training an Indian to do his job. Apparently Dems believe in trickle down economics too as their actions have made clear.

    February 7, 2011 at 8:43 pm | Report abuse |
    • MidwstrnGrl

      Average is right. That is what you are...Warren Buffet is everything your not – a successful, exceedingly rich, business man with an actual conscious.

      February 7, 2011 at 11:32 pm | Report abuse |
    • MidwstrnGrl

      conscience...dang droid...

      February 7, 2011 at 11:35 pm | Report abuse |

    if they really wanted to fix the economy and stimulate it.. just make everyones morgage the going rate like 4%

    February 7, 2011 at 8:48 pm | Report abuse |
  5. Cesar

    @banasy, maybe the rich real estate land lord that has oodles of money to invest, and add to his many rental houses. A house may be sold for $55,000, but can re-bound and appreciate in 5 years to $85,000. In this simplistic, but realistic example, he generates income for five years, and gets a $30,000 profit in his rental house.

    February 7, 2011 at 8:54 pm | Report abuse |
    • DevilsAdvocate

      You are forgetting, there may be a mortgage to pay on the property, at the very least property taxes. There is also upkeep on the property. You also assume the house can be rented and the renters will not damage it. And last but not least, when you sell a house it is very typical to pay a 6% commision to the agents.

      February 8, 2011 at 6:34 am | Report abuse |
  6. Ike

    I hope a earthqauke and sinkhole opens and swallows amerlka...

    February 7, 2011 at 8:57 pm | Report abuse |
  7. Cesar

    @Ike, I hope you get jock itch and constipation simultaneously.

    February 7, 2011 at 9:01 pm | Report abuse |

      I hope he gets diarehia and has to vomit at the same time..

      February 7, 2011 at 9:15 pm | Report abuse |
  8. banasy

    It's not evident in my neighborhood at all, though. There isn't any rich landlords here; nobody is renting here, either. In my neighborhood, rents go for between 1,000-1,500/mo, and there are not many landlords willing to go the month-to-month route. One of the few rental houses here was even forclosed upon when the owner's got a divorce, and the original mortgage wasn't being paid! So, the renters were thrown out, and now the house sits empty.

    Combine that with an ordinance that was passed recently limiting the number of rentals here in town, and more and more houses are going unoccupied. So not even the rich landlords can swoop down...nobody is buying, nobody is renting....

    February 7, 2011 at 9:04 pm | Report abuse |
  9. banasy


    God, you crack me up!!!

    February 7, 2011 at 9:06 pm | Report abuse |
  10. Cesar

    I guess it's too risky for land owners at this time. Safe to say most real estate agents are eating beans until things improve. Then bring out the steaks!

    February 7, 2011 at 9:10 pm | Report abuse |
    • Chuck

      When? In 2030. That is when I heard housing prices will return to 2008 levels.

      February 7, 2011 at 11:42 pm | Report abuse |
  11. Cesar

    I hope he develops a serious nervous condition and has to give a speech at the U.N.

    February 7, 2011 at 9:27 pm | Report abuse |

    i hope he goes in a rest-stop restroom and the door closes behind him only to realize theres poo smeared all over the door and walls and not one shread of paper anywhere..

    February 7, 2011 at 9:38 pm | Report abuse |
  13. banasy

    @Cesar & RUFFNUTT:

    Now you're both cracking me up!!! Keep 'em coming!

    February 7, 2011 at 9:47 pm | Report abuse |
  14. Cesar

    I hope he gets into a fight with Mike Tyson, and loses one of his ears.

    February 7, 2011 at 9:57 pm | Report abuse |

    i hope he run's into mike vick on holloween dressed up in a dog costume

    February 7, 2011 at 10:08 pm | Report abuse |
1 2 3 4 5