Foreclosed Houses Unloaded at Auction
Buyers Snap Up Homes at Bargain Prices

By Dina ElBoghdady
Washington Post Staff Writer
Sunday, October 5, 2008

Trisha Bayles, who has been saving for years to buy her first home, got flustered when bidding started on the house she wanted in Laurel.

"This guy in front of me said it was going for $210,000 and next thing I know the auctioneer is in the aisle saying: 'You want it for $200,000?' " Bayles said. "I'm like: 'Okay, sure.' Then I was like: 'Did I get the house?' And then it was like: 'Yes, yes. I got it!' "

In a matter of minutes, the 34-year-old had agreed to buy a two-story red brick home for less than half of the $465,000 price it sold for about a year ago.

On display at the Walter E. Washington Convention Center yesterday was the flip side of the gloomy consequences of the foreclosure crisis: a cheery scene of back slaps, congratulatory handshakes -- and more than a few jitters -- as people like Bayles snapped up homes at bargain prices.

Wearing tuxedos, auction assistants scurried up and down the aisles, pointing fingers, shouting numbers, pushing to offload houses on behalf of some of the nation's largest lenders. By this afternoon, they want to be rid of about 400 single family homes, townhouses and condominiums in the area. More than 4,000 registered bidders were expected to cycle through the two-day event.

"It's surreal," said Rick Weinberg, spokesman for Real Estate Disposition Corp., the auction firm. "On one side of this equation, there's total darkness and on the other side, the sun is shining brightly."

Long before yesterday, Bayles had been eyeing the small home in Laurel. But when she made a bid on it, she learned that the lender had yanked it off the market two days earlier to put it up for auction.

This is a common tactic for lenders who want to cut their losses. Instead of leaving a home to languish, many will turn it over to an auction company and move on.

The home Bayles bid on was listed by the lender for $285,000 when she spotted it. Yesterday, the four-bedroom colonial came with a killer opening bid: $99,000.

"It's moldy," said her father, William Bayles, who was with his daughter yesterday. "We're going to have to do a lot of work on it."

Bayles finished the paperwork on site. She plans to pay $23,000 for down payment and closing costs, money she said she has been saving "all of my life."

If all goes as planned, Bayles will end up with a government-backed construction loan that will allow her to pay for the needed renovations.

Jeff Wilson, 23, was not so lucky.

He lost the three-bedroom colonial he wanted in Fort Washington, just a few doors down from where he lives with his mother.

Early in the day, when the home first came up for auction, another shopper outbid him. But the financing must have fallen through, because an hour later, the house was back on the auction block.

In 2005, the home sold for $354,900 and it has more recently been listed in the $260,000 range.

"We're getting it at $185,000," he said, pumping his fist and jabbing his friend and real estate agent Jelani Jackson, who bought his home from the same firm in June.

For his effort, Jackson would have made a 1 percent in commission had the deal gone through.

But it did not.

Wilson had been pre-approved for a 30-year, fixed-rate loan insured by the Federal Housing Administration. But the appraisal on the house did not meet the notoriously strict FHA guidelines.

Wilson said he could have secured another type of loan if he were willing to make a larger down payment, but he chose not to. "I don't want it if it's not a steal," he said. "My back is not up against the wall. It's the lenders who have their backs up against the wall, not me."

Last year, the foreclosure situation was less dire in this region. In July 2007 , there were 16 foreclosures for every 10,000 area properties. Now there are 216, according to George Mason University's Center for Regional Analysis.

Yesterday, it was up to the lenders, not the auction house, to determine how low prices should go on these properties. Opening bids ranged from $1,000 for extreme fixer-uppers to $399,000.

Gordon and Dana Haraway -- who already own a home but want to invest in real estate -- bid on four homes before they finally clinched a two-bedroom townhouse in Alexandria for $160,000. They had toured it a few days ago.

But there's a catch. Their bid was below the minimum required by the lender. They'll now have to wait two weeks to find out if the lender accepts it.

Gordon Haraway, a loan consultant, said he does not mind being in limbo. "It is over, in the sense that it's out of my hands."

Dana Haraway, clutching their paperwork after having spent more than an hour with a lender, was less relaxed. "We had seconds to make up our minds about spending hundreds of thousands of dollars," she said. "My stomach is in knots."