Competition is High For Boston-area Foreclosures
October saw a 91 percent increase in foreclosure proceedings.
Foreclosures are on the rise again in Massachusetts, as banks begin to lower the boom on delinquent homeowners they have let slide for years.
Lenders kicked off the foreclosure proceedings on 965 homes across the state in October, marking a 91 percent jump over October 2013, reports The Warren Group, publisher of Banker & Tradesman. It marks the eight consecutive month that foreclosure petitions have increased in Massachusetts.
Yet even as foreclosures rise again, the average buyer who dreams of snagging a house at a bargain basement price at an auction can face some challenges, especially in Boston’s pricey suburbs.
So what gives?
One of the biggest barriers to scooping up a foreclosure is competition. Investors large and small are constantly on the hunt for distressed properties, ready to snag battered houses on the cheap with call cash offers.
“We make money turning over properties,’’ Nick Aalerud, principal of Woburn-based AA Real Estate Group. “This is how we feed our families. We buy, fix, and sell.’’AA Real Estate Group has bought, fixed up, and sold 150 distressed homes over the last nine years from southern New Hampshire to the South Shore.
Aalerud is always on the lookout for deals, networking with other real estate agents, attorneys, and the like.
And he is just the tip of the iceberg, with the market packed with similar, small-time investors, as well as larger operators, said Darin Bloomquist, a spokesman for RealtyTrac, which tracks sales of foreclosed homes and other distressed properties.
Another barrier is the condition of the homes, which are often so run down and beat up that they need tens of thousands of dollars in work.
Aalerud managed to make a $24,000 profit on a Waltham house he renovated and resold for $431,000. But it involved months of intensive work, including moving the house off a cesspool and hooking it into the city’s sewer system.
He fears he will wind up losing money on a three-bedroom ranch in Tyngsboro he scooped up for $109,900. Sounds like a great price, but Aalerud had to tear down the house, only to find it infested with spiders and the well pump had gone missing.
While it may be tough for the average buyer to snag a foreclosure, it’s certainly not impossible, especially in state’s older industrial cities like Haverhill, Brockton, and Lowell. Moreover, there are special loan packages with renovation money that are available through MassHousing, a quasi-independent state authority.
That said, the recent jump in foreclosures may mark a last hurrah for the years-long foreclosure crisis.
The number of homes being auctioned off is well below levels seen during the Great Recession, even with the latest increases.
The number of foreclosure filings in Massachusetts in November was 745, higher than it was a year ago, but not close to the 2,800 a month the state was seeing back in 2008 and 2009, RealtyTrac’s Bloomquist said.
“We are still well below that initial crisis,’’ he said.
Even with recent flurry of activity, there is a shortage of foreclosures on the market, Aalerud said.
He’s had to find other ways to land distressed properties, taking on fire-damaged homes or properties trashed by hoarders.
Short sales, where the owners unload their house for less than the mortgage in hopes of avoiding foreclosure, are another source.
“Typically, ‘cash is king’ when you’re talking about working with distressed sellers,’’ Aalerud said. “They don’t want to have the added stress of knowing their sensitive deal may fall through if someone’s credit isn’t in order, or it doesn’t appraise.’’
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