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."

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Filed under: Auctions • Economy
soundoff (104 Responses)
  1. Cesar

    I hope he goes surfing, falls, and a shark bites both has b*lls off.

    February 7, 2011 at 10:10 pm | Report abuse |
  2. Jeff Frank - Ohio

    Who reaps the harvest? I don't think it's the little naive but "very honest and loyal hard working poor", doling $1000/mo. rent just clearing $350/wk. in "fixed" wages, barely getting caught up in their utility arrears and living on food scraps. That just doesn't leave too many people left in the equation....does it? Really?

    February 7, 2011 at 10:15 pm | Report abuse |
  3. RUFFNUTT

    i hope he goes to a driving range and a kid hits a golf ball into his nu-tts

    February 7, 2011 at 10:21 pm | Report abuse |
  4. Ike

    Cesar, may the bird of paradise fly up your butt..

    February 7, 2011 at 10:24 pm | Report abuse |
    • RUFFNUTT

      up your butt with a cocanutt..

      February 7, 2011 at 10:39 pm | Report abuse |
  5. Cesar

    I hope he is making love to his girl and develops a sudden case of ED.

    February 7, 2011 at 10:24 pm | Report abuse |
  6. meee

    Who cares? people living in homes they couldnt afford. .using them as an atm hey they get what they deserve

    February 7, 2011 at 10:28 pm | Report abuse |
    • camiwa

      AMEN!

      February 8, 2011 at 12:34 am | Report abuse |
  7. Ike

    My girlfriend is my brother

    February 7, 2011 at 10:42 pm | Report abuse |
    • rudyone

      Funny, he told me you were his and I believed him because you are mine too. Happy man Valentine's Day sweetheart!

      February 8, 2011 at 5:34 am | Report abuse |
  8. chrissy

    and how do u come to that conclusiomn meee? if ppl got what they deserve the rich would be broke and the hardworking average joe would be rich!

    February 7, 2011 at 10:55 pm | Report abuse |
    • lu

      that is a broad generalization. many "rich" people are wealthy because they work hard and there are plenty of "poor" people who are just plain lazy. if you want to make money, you have to work your butt off, have a decent degree, and network like crazy.

      February 7, 2011 at 11:47 pm | Report abuse |
  9. Phil G.

    It's VERY CLEAR that the nation's banks have found a financial formula that makes them billions from accelerating foreclosures with ZERO ENFORCEMENT OF ANY REGULATIONS to stop them from doing it.

    Hey,what's new about that.

    Explains why people have pretty much lost their desire to stretch out their finances to buy a home.

    ANY HOME.

    GREAT WORK BANKS-KEEP HOARDING THOSE PROFITS.

    February 7, 2011 at 11:16 pm | Report abuse |
  10. lu

    half of the reason we ended up in a financial crisis is because the bank's went broke. why? because people weren't paying their loans. why? because they purchased real estate that they couldn't afford. responsibility is shared by both the banks and the borrowers for the blowup of the sub-prime mortgage industry. foreclosure is the only option in many situations, for a variety of reasons.

    February 7, 2011 at 11:19 pm | Report abuse |
    • camiwa

      AMEN.... But I put more on the borrower than the banks. We know what the banks are in it for... money. The borrowers should have done their due diligence, as they had the most to lose. I did, and I waited.

      Many friends told me to buy after buying over-priced boxes (condos). I didn't listen, because A. I KNEW what I could afford, despite what the mortgage companies were saying; and B. I just couldn't spend THAT much money on a house that small. The whole period was one of absolute insanity.

      February 8, 2011 at 12:28 am | Report abuse |
  11. Sal

    The story on the people purchasing houses at the redc auction for a fraction of the price is not completly accurate. The article failed to mention most of the houses being sold have people living in them tenants or previous owners. The purchaser is responsible to get them out. The expenses and time needed to get the people out of these fully occupied houses can be very costly. I also was the highest bidder on 5 different houses at the above auction and waited at the auction for more than 5 hours untill 130 am filling out paperwork and parting with my down payment for 2 weeks just to tell me that none of the offers were excepted. All of these true facts have not been mentioned ????

    February 7, 2011 at 11:23 pm | Report abuse |
    • Ralph

      Sal, thanks for adding some truth to the other side of what happens at these auctions. Even the highest bidder is often rejected or asked to fork out a higher bid 'after' the auction was conducted.

      February 8, 2011 at 12:01 am | Report abuse |
    • Sam

      Sal, If you don't mind can you please explain this auction process ? So the highest bid is not an automatic contract for sale ? you mean the auction guys are just collecting bids and presenting it to the seller (bank) who may not accept it after all ?
      good to know the full story...

      February 8, 2011 at 12:36 am | Report abuse |
    • Damien

      yes, that happens at these types of auctions, however, a trip to your county courthouse gets you an auction property on the spot, each state has different rules regarding foreclosure process, it is very easy to get a property in a deed of trust state, onlt time those are rescinded is when there's poor communication between trustee and bank and house was improperly foreclosed, doesn't happen often, but does happen

      February 8, 2011 at 1:43 am | Report abuse |
  12. The_Mick

    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."
    =========================================
    How many "people" looking for a home were at that auction? Those who knew the good price to bid, had the finances already worked out, etc. were businessmen who will jack the prices up and get the "absolutely phenomenal profit when they sell it the "people". And the banks wouldn't be underadvertising auctions, running silent auction for a matter of hours instead of days or weeks, etc. if they weren't getting their money through some collusion with those businessmen either.

    February 7, 2011 at 11:36 pm | Report abuse |
  13. erib baumen

    Did u know that african americans have ruined our country

    February 7, 2011 at 11:40 pm | Report abuse |
  14. Davey Jones

    Just curious how many people being forced to move out by foreclosure demolish the homes to such an extent as to make them uninhabitable.

    February 7, 2011 at 11:41 pm | Report abuse |
  15. noonie

    This is ridiculous. If you're going to turn around after seizing a house and sell it for pennies on the dollar, why not just slash the mortgages to make the dang house affordable to the original borrower? THIS IS INSANITY.

    February 7, 2011 at 11:45 pm | Report abuse |
    • lu

      because the banks wouldn't make any money. and if the bank's don't make money, they go under. that is how we ended up in this situation in the first place. the banks know they won't make money off the house. they ultimately want to get a deficiency against the borrower and have that judgment out there for years in the event the borrower ever acquires some assets that it can collect. to satisfy the amount owed. as easy as it sounds to get the money judgment first, it wouldn't work because the mortgage lien would remain on the property. the borrower would never be able to sell it.

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

      Because owning a home is a PRIVILEGE, not a RIGHT.

      Why not slash the prices for someone who lives within their means and waited? Like me. Why does this nation insist on rewarding stupidity.

      I have complete sympathy for someone who bought a home they could afford and lost their job due to the crisis. That's very sad.

      But for those who bought homes they cannot afford, they don't deserve to keep them. And I would rather my tax dollars went to helping someone like me (who waited because they KNEW their limitations) than to helping the stupid.

      February 8, 2011 at 12:31 am | Report abuse |
    • john

      Yes YOU ARE GETTING IT....if they wanted too they would do this, could have forestalled most of the mess..HEY actually assess them for their value..and start the mortgage over..what was lost? a few months and 20 years down the road money that they would never get anyway???? That's why they will take it and turn it to get ANY Money now.

      HOW stupid is the whole mortgage idea? Do you pay an extra 10K for a car that is used for 10 years? Can you sell chewed gum?

      Solution: 1. Escrow account for anyone more than 2 months PD. "owner" pays what they can into this while the whole charade is playing out....
      2. Reassessment at current market rate.
      3. Option to continue paying at the new rate, no penalties, or short sale, or walk.
      The number of people who can make up arreages, or repayment plans ...on the wages we make today ..it's not working....property as a bank valued asset for more than market value ...it's just goofy.

      February 8, 2011 at 12:41 am | Report abuse |
    • Drew

      I agree. Why kick out someone who lost their job, has been out of work for over a year, submitted over 260+ resumes a year and got three interviews (total), works freelance as much as possible to pay the inflated rates when you can just offer them (me) the place that I want and need to keep over my head when you're just going to sell it to someone else for 1/3 to 1/2 the price I've been paying the interest on and make Realtors $8-9K richer in the process for getting their friends a deal on someone else's misfortune?

      February 8, 2011 at 2:05 am | Report abuse |
    • Drew

      What's worse is not being able to refinance without a job when it's those people who, through refinancing at better rates, would have a better chance at scraping up freelance money to pay those reduced payments with.

      February 8, 2011 at 2:11 am | Report abuse |
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