Valley investors shying away from foreclosure auctions

With foreclosure rates hurtling upward, Valley lenders are being forced to take back a growing number of homes from cash-strapped borrowers — costing them tens of thousands of dollars.

That’s because investors aren’t biting at foreclosure auctions since many properties for sale have no equity left, said Tom Ruff, a partner at Glendale-based data research firm Information Market.

“They’re looking to buy it at a discount at the sale, and they just don’t see that those properties are profitable,” he said.

Valleywide, 18 percent of the 676 properties foreclosed on last month were purchased by third-party buyers — typically investors — while lenders took back 82 percent, statistics compiled by Information Market show.

That’s a sharp reversal from June 2005, when investors snapped up 75 percent of 105 foreclosed properties.

“That’s when the market was just sizzling hot,” Ruff said. “Investors were more willing to take a chance.”

But with home price appreciation now stagnant, many investors are steering clear of buying up foreclosure properties — leaving lenders to carry hefty financial burdens.

Taking back a home back can cost a bank tens of thousands of dollars in attorney fees, repairs, maintenance, utilities and marketing by a real estate firm.

Many are also being forced to buy back bad loans they sold to national mortgage servicing companies or Wall Street investors, said Eric Bowlby, president of AmeriFirst Financial in Mesa.

And it’s causing a climbing number of firms to shut their doors, Bowlby said.

“It’s unfortunate,” he said. “A lot of people, they’ve made their bed. Now they have to sleep in it.”

It’s a problem throughout the country and across income levels, said Patti Crawford, who manages Intero Real Estate Services’ foreclosure division in Mesa.

A two-bedroom home off of Thunderbird Road in the West Valley was put back on the market by a lender for $45,000, Crawford said.

Another lender-owned home with four bedrooms was on the market for $1.6 million in Scottsdale, she said.

“Properties are coming back in droves,” Crawford said.

Borrowers need to be more careful before they get into loans and make sure they know what they’re signing, she said. Many loan officers jumped into the business in recent years to capitalize on the boom — pressuring some homebuyers into loans they couldn’t afford. Arizona loan officers aren’t licensed, Crawford said. “They’re not governed,” she said. “Nobody dictates to them what their job is and the legal ramifications.”