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. chrissy

    and tonyl u are SOOOO right! bush screwed us over good. stupid is as stupid does! then u got the female version-palin....leading the tea party. it just gets better and better.

    February 8, 2011 at 1:05 am | Report abuse |
    • docserveralson

      Not completely true that this was all Bush. In the 80s, I think it was, the NAACP and the ACLU started pressuring real estate and mortgage lenders to make more loans to "minorities." It didn't matter that they had lousy credit, it was racism to deny them. Fanny Mae and Freddy Mac were government agencies that worked this system, along with FHA. So when 9/11 happened, Bush just encouraged more people to apply to "realize the American Dream." I remember those words exactly. So the bubble got going and the whole world went for it.

      February 8, 2011 at 2:16 am | Report abuse |
  2. chrissy

    and sam u need to read what u post b4 u send it. i dont think u really meant that african americans caused slavery cuz that would be stupid!

    February 8, 2011 at 1:31 am | Report abuse |
  3. Houser

    Yeah erib! being racist and stupid is fun!

    February 8, 2011 at 1:38 am | Report abuse |
  4. a

    Thwy forclosed on my condo. I owed 150k but the value was about 30K. it's now around 20K. it was a tiny 1 bedroom. i got a paper in the mail 1 year later that said the bank that got it back valued it at 190K. Lesson? US Home bank says it's worth 190K, buys it back for 100 bucks, sells it for 5k and says they lost 185k. It's a scam. they make money by doing it and it's ILLEGAL

    February 8, 2011 at 2:09 am | Report abuse |
    • docserveralson

      Yeah, the corruption involved here is huge. We've only seen the tip of the iceberg. It almost makes you want a communist revolution and make the banker, bureaucrats, and politicians all walk the plank, or dance on the line, or say hello to madame guillotine. That hard rain that Dylan sang about hasn't begun to fall yet, but it's coming.

      February 8, 2011 at 2:23 am | Report abuse |
  5. Hannah

    Unbelievable! The hate/venom that people above, like a Chrissy and other people, throw @ Conservatives/Republicans. She lacks so much information or is blind and doesn't see who the bad guy really is (not Pres. Bush or Palin).

    February 8, 2011 at 2:49 am | Report abuse |
  6. kathy Rothchilde

    The USAs sneaky,corruptive, exploitive, banks in your face, our Govt, makes Egypts Govt look like a walk in the park.Nothng inour lives is free; most activities are either extremely expensive or are against some unknown, obtuse law that was just invented by our money-grubbing, Commie Govt.Lets see what Egyptian freedoms these people end up with when we take over with a new American-backed, brutal, selfish, puppet put into Mubaraks place. Its all about $. More control, power means more money for our Govts banks and other countries banks,just like ours! KCR

    February 8, 2011 at 3:25 am | Report abuse |
  7. Forclosed

    My house was foreclosed on, the lender sold the house for $100 at action to an employee of the lender. The employee and others in the business started a trust corporation. The trust corporation then paints the house and sells it a little under market price. The lender, since the house was insured, turns the loss over to MI as a loss and gets paid the full price of the house. The government (us) pays the difference to the insurance company. Who profits, the employees with connections and the lenders. Losers (us)!

    February 8, 2011 at 4:00 am | Report abuse |
  8. Andrew Murphy

    The American taxpayers bailed out the Banks and then the Banks began repossessing the American taxpayer's homes. It doesn't get more vile than that. Off with their heads!!!!

    February 8, 2011 at 4:27 am | Report abuse |
  9. Tjp

    Apparently the Republican bashers have forgotten that history is recorded on video these days. Search out Barney Frank (as head of the committee responsible for oversight of Freddie Mac and Fanny Mae) tell about the need to ignore President Bush's request to tighten the mortgage market because trouble was coming potentially (and in the early 200-2004 timeframe there was a lot to indicate it). Instead Barney (Spend your money not mine) Frank pushed to extend mortgages farther and make it easier for more people to qualify. This was the start of the sub-prime mortgage crisis, which is the recognized trigger (amongst many others) for the current world wide economic crisis. (the other more esoteric rationalization is the convergence of the Asian and Western K-Wave economic cycles for those looking deeper, it seems it was inevitable, we are just messing up the reemergence)

    February 8, 2011 at 4:27 am | Report abuse |
  10. Mike

    I actually expected an answer from this article... Gee, tell us something we didn't already know. I love the rhetoric, but... so who profits again??? LOFL!!!

    February 8, 2011 at 5:07 am | Report abuse |
  11. Nancy

    We've got 15,000 and counting unemployed American's who used to have jobs and they owned a home. They lived in their homes until they ran out of unemployment and the only job they could find was a part time minimum wage job. This country is still hemorrhaging jobs. So who is going to buy these dinosaur homes? And if people don't have jobs and can't buy cars, how are they going to get to work? And if we go through hyperinflation, which is coming, who will be able to afford the gas, food, and utilities? I'm amazed over the level of immaturity and cold heartedness on this thread. People who think this is a Democrat or Republican issue are so uninformed. And those who are young (20’s or 30’s) and have a job, these poor fools have no clue, "they're next". You’re only being used.

    February 8, 2011 at 5:22 am | Report abuse |
  12. Jon O

    I worked for five years for a NC firm that processed foreclosures: this is a shady business with all kinds of underhanded dealings designed to maximize profit, like always, for a very select few people.

    We had attorneys, who under a conflict of interest were legally barred from doing so, using shell businesses or friends to buy up foreclosed property... taking their paychecks from the banks for rushing a FC through the pipes and using it to buy FC homes they were legally not allowed to purchase. And that's just the tip of the iceberg. Let's not talk about suspense funds, etc.

    You want to see greedy people scrambling to make as much money as possible from a situation they themselves helped cause, work in the NC FC foreclosure industry for a few months. Sadly, the only people who come out ahead are the folks who already have the resources on hand to buy up these properties.

    February 8, 2011 at 5:35 am | Report abuse |
  13. Alton

    Your remarks fall on deaf ears. The two MASSIVE economic crashes- 1929 and 2008- both happened on Republican
    watches. The impact of the last one has multiple indications that we may not pull out- its that bad or worse. With
    conservative philosophy of shrinking government and lowering taxes(especially for the wealthy), some would think
    a major down-turn could be avoided, but IT WASN'T, even after eight(8) years(2000 to 2008) of Repub rule. Some conser want to blame Bush,Jr. BUT there were far more hands in the pot than just his. Conser say " BUT the answer iwill NOT come from Democrats". So then, where does it come from- Republicans ???? Perhaps some silver-tonguer ??

    February 8, 2011 at 5:57 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 6:23 am | Report abuse |
  14. Travis

    Banks benefit pure and simple. The truth is typically the most obvious explanation.

    February 8, 2011 at 6:18 am | Report abuse |
  15. Chairmanbuzz

    The auctions NEVER start below what is owed to the lender/bank. So, who do you think profits? Its definitely not the owners who paid dearly, interest up front, for the overpriced homes. And who says they are worth that price, the banks and the real estate mogels who stand to profit from their sale. Its all a facad, you're not getting a bargain, your getting the real price only, oh plus the 5% markup the auction house rips you for as well. All in all, the new buyer is still getting ripped! Its all smoke and mirrors...

    February 8, 2011 at 6:38 am | Report abuse |
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