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Some foreclosed homes going for dirt-cheap prices

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POSTED May 25, 2012 1:17 a.m.

ST. LOUIS (AP) — Foreclosed homes typically sell cheap, but just how cheap is surprising some buyers in the St. Louis area.

The St. Louis Post-Dispatch checked public records and found that some homes in the region are going for a small fraction of the price they sold for just a few years ago.

The Post-Dispatch looked at St. Louis County real estate sales records and found many examples of homes selling at bargain prices. A Florissant home that sold for $159,537 in 2009 sold in October for $29,590; a three-bedroom ranch in University City was sold by the government-controlled mortgage company Fannie Mae for $24,500 last year, a far cry from the $94,000 it sold for in 2006.

Investor-buyers are combing the market for bargain-bin listings, hoping to quickly flip them or rent them out. They're taking advantage of banks and other lenders eager to move toxic assets off their books.

Among those investor-buyers is Sam Shih. He recently paid $12,000 for a 1,600-square-foot suburban home assessed at nearly $90,000, a house in a quiet neighborhood of neatly kept ranch homes.

"I'm amazed at how low some foreclosed properties are going," said Al Rosen, who monitors distressed sales at Coldwell Banker Gundaker, a real estate firm. "You and I could buy them on a credit card."

The low prices, though, can have a detrimental impact on their communities as values of surrounding homes suffer. Falling prices discourage improvements to properties. Some homeowners become trapped in homes they can't sell because their mortgage exceeds the home's value. The real estate analysis firm CoreLogic said 97,000 homeowners in metropolitan St. Louis — nearly one in six — were in that state as of September, the most recent month for which figures were available.

Foreclosed homes typically sell for 25 to 30 percent below the price of owner-sold houses in the St. Louis region, said economist Bill Rogers of the University of Missouri-St. Louis.

Real estate pros keep an eye out for the real bargains.

"The really nice properties are the ones that everyone cherry picks; the ones that sell for 50 cents on the dollar." said Pat Jones, who invests in foreclosed real estate. "Sometimes they sell something on the courthouse steps and you say, 'You're kidding me. You'll take 40 cents on the dollar on that?'"

Many foreclosed homes end up in the hands of Fannie Mae. Spokesman Andrew Wilson said that during the housing boom in 2005, the company would recover 87 percent of the money it lent in a foreclosure. Now, it gets 57 percent.

Not all investors in foreclosed homes are making a killing. Robert Lederer isn't rich enough to pay cash for houses so he has to pay interest on loans, repair costs and agent commissions when homes sell. In some cases, lenders foreclosed on properties he bought after the financial panic when he couldn't find buyers.

"I'm struggling in this market," Lederer said. "I just went to a job interview as a maintenance man in an apartment building. I hope I get the job."

Others have had better luck.

"There are a lot of guys paying cash for houses, then getting $700 or $800 a month rent, and making their money back in a year," Jones said. "The only scary part to me is, what is your exit strategy once you get 30 of these?"

 

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