For sale: Cash only, no refunds

Published 8:01 pm Friday, July 2, 2010

GILBERT, Ariz. — If we’re going to search for gold in the wreckage of the mortgage crisis, then 6:57 a.m. in front of 1009 W. Juanita Avenue is as good a time and place as any to start.

The Cooper Ranch subdivision, tucked behind an industrial park 25 minutes from downtown Phoenix, is just beginning to stir. But when Casey Doran pulls his pickup to the curb, the tan stucco house has already seen a steady trickle of visitors. From under the visor of his ball cap, Doran sizes up the first foreclosure of the day.

“Still occupied,” he says, nodding to a green plastic tag hanging from the meter by the garage, proof that someone’s paying the electric bill. He leans on the bell; when no one answers, he tries the door. The house resists his advances, leaving Doran squinting into the darkness behind the blinds. He tugs on the back gate, peering over the wall into a yard corralling chest-high tumbleweeds.

“He isn’t much of a grass person,” Doran says, snapping pictures with his iPhone.

In a little more than three hours, the intelligence Doran gathers in these 10 minutes of reconnaissance will be put to the test. That’s when 1009 W. Juanita and nearly 600 homes like it are scheduled for auction to the highest bidder.

Maybe, with bidding set to open at $105,000, the house is a bargain.

Or maybe it’s a mistake, waiting to drag an investor under.

Either way, there’s little time to ponder this 1,631-square-foot gamble. But there will certainly be other chances.

After all, 50,000 homes clog the county’s foreclosure pipeline and more are added every day. But before you jump to buy, know that you’ll have plenty of company.

At the top of the housing boom, certain cities drew investors like magnets. In Phoenix, speculators bought up houses, largely with borrowed cash, trying to take advantage of fast-rising prices. Those who didn’t sell in time were stung when the market collapsed.

But early last year, a new crop of investors — many buying with their own cash — ventured in, sensing opportunity. In the months since, the share of homes bought by investors at daily auctions has multiplied more than fivefold.

“These are unique times. Very, very unique times,” says Tom Ruff of The Information Market, which analyzes Valley real estate data. “I think the best way to describe it is the Wild West.”

The scene unsettles some, wary that investors could dump homes if the market weakens or take advantage of individual buyers or renters. Others are troubled at banks’ willingness to settle for less at auction rather than give more substantial concessions to homeowners locked into crushing loans. But something’s got to be done with all these overmortgaged, underappreciated houses.

“The investors are a tool to help get those properties moved into new hands,” says Diane Drain, a Phoenix bankruptcy attorney and real estate trustee. “At this point, the dam is so broken. How do you stop the flow? I don’t know how you do it other than one little stick at a time.”

During the boom, Steve Vadas sold title insurance on thousands of homes. Now, with business dried up, he’s landed back at the job that gave him his start — in the shadow of the Maricopa County Courthouse, auctioning foreclosures.

It’s hard to recognize the place.

In the old days, Vadas stood on the courthouse steps reading lists of foreclosed homes aloud and almost always to himself, eyed like a crazy man by the occasional passer-by.

“Nobody would bid on them,” he says. “I literally was reading them to the air.”

No more. On a May afternoon nine years later, a crowd of 60 churns the plaza outside the courthouse doors in downtown Phoenix. Dressed in board shorts and wraparound shades, they scan pages-long printouts of houses and talk furtively into headsets to unseen investors. Five auctioneers compete simultaneously for their attention.

Once Vadas, who conducts sales for Trustee’s Assistance Corp., handled 60 to 70 foreclosures a month. Some days now, he and fellow auctioneers run through that many in an hour or two.

Even in good times, some homeowners failed to pay their mortgages, requiring a process for lenders to recoup losses. In Arizona, they’re called trustee’s sales, and in a steady economy most were little more than formalities. Foreclosed homes were usually offered for the amount owed and, with few bidders, nearly always claimed by the bank holding the loan.

But that was before home prices here plunged by half. Before debt-saddled homeowners started abandoning houses in the dark. Before lenders who never intended to get into the real estate business ended up holding the keys.

In the last year, they’ve done what any merchant with few customers and shelves full of stuff of sometimes dubious quality would do to avoid taking delivery of even more: Slash prices. Cash only. No guarantees. No refunds.

“It’s capitalism at its finest — or at its worst,” Vadas says.