Foreclosures, Falling Prices Spur Pr. William Home Sales

For buyers, the dizzying pool of repossessed property is not likely to dry up anytime soon.

In a well-kept subdivision on the outskirts of Manassas this week, Tracy Comstock took her client, Chris James, to view a foreclosed townhouse during his lunch break. The weeds in the back yard were chest-high, but the 2003 home needed little more than a thorough vacuuming to be ready for the rental market.

"Some of these places are so run-down, you walk in and walk right out," James, a mortgage underwriter and Clifton resident, said while inspecting the kitchen. The floor was clean, the appliances almost new. "This one is a lot better than most of the stuff we've seen," James said.

In May, James bought his first investment property in Manassas, an early 1990s townhouse he picked up for $168,000, more than $100,000 less than its assessed value. He quickly rented it for several hundred dollars more a month than his mortgage payments. The family that moved in had lost their home to foreclosure, he said, and could rent his place for almost half of what they had been spending on mortgage payments.

Bargain-hunting investors are the best hope for stabilizing foreclosure-ravaged neighborhoods, he said.

"There are all these decent homes out there," James said. "If we have the ability to purchase them and rent them to families at affordable prices, it's a good thing for the community that they're not just sitting here empty."

James said he avoids short-sale properties, but Comstock said she has other clients who are willing to give them a look. "With a short sale, the property is usually in better condition because the person is still living there," she said. "But the bank may take five to six months" to approve the sale.

In the new market, Comstock said, she and other real estate agents have learned to navigate the bureaucracy of large banks on behalf of clients, and the process requires vast stores of patience. Sometimes a bank's foreclosure department will repossess a home just as its loss-mitigation department is nearing a deal for a short sale, she said, explaining that the two departments may be located in different states. "I've had them terminate a contact by mistake," said Comstock, of Annandale-based Mega Realty and Investments.

The steep drop in prices has shattered the old psychology about asking prices on homes. With so many houses on the market and so many buyers on the hunt, some banks are aggressively underpricing homes to elicit multiple offers.

"Prices are low enough that it's an auctionlike competition when you go bidding for homes," said Maribel Alvarez, who specializes in foreclosures and short sales in Prince William. "Investors are purchasing low-end homes, so it's becoming harder and harder for first-time home buyers because banks are looking for 20 to 30 percent down."

Prince William is slated to receive several million dollars in foreclosure assistance from the federal government in the next few months, but short of a government foreclosure freeze, additional bank-owned homes will hit the market.

There were 844 foreclosures in the county last month, land records show, up from 256 a year before and 40 in 2006.

With recession fears running high, real estate agents are encouraged by the market but urging caution.

"I think more people have come to the realization that this could be the bottom, and now's the time to buy something while prices are low," said Keith Elliott Jr., a real estate agent with RE/Max Olympic in Haymarket. "The problem is you have to think long term."

He added, "If you're going to be in the home for five to 10 years or longer, you'll be fine."