Bidders See Opportunity at Foreclosure Auction

Sale Prices for Area Houses Fall Far Below Valuations

At the Walter E. Washington Convention Center yesterday, software developer Jatinder Singh decided to do a little holiday shopping.

Singh, 36, sat in a foreclosure home auction and watched as two aggressive bidders competed for a $1.3 million, six-bedroom house in Dickerson, near Potomac. When the auctioneer yelled "going once, going twice," Singh sprang up with the winning bid: $470,000.

Now he had to go home and tell his wife and two children about his purchase and that they should get ready to move. "They're going to be really surprised," said Singh, 36, of Crofton.

There may be a recession going on and homeowners are losing their houses, but for others that can mean opportunity.

The foreclosure auction, which concludes today, was sponsored by Real Estate Disposition Corp. About 174 houses sold yesterday, and the firm expected an additional 145 or so to go today. Banks and mortgage-holders hire the company to auction foreclosed houses across the country. The Irvine, Calif.-based company was launched in 1990, during the last major real estate downturn. This year, the company will auction about 4 million houses in cities across the country, said Trent Ferris, the company's vice president for auctions.

"This is the perfect storm of opportunity. We can turn vacant homes into owned homes," Ferris said. "If now is not the time to buy, I don't know when is." He said interest rates on 30-year fixed-rate mortgages are at their lowest in more than 30 years.

It was an emotional day for Washington resident Deartra Todd. Todd snatched up the second house of the auction yesterday and she could not stop the tears from flowing. Todd cried as the auctioneer yelled "sold" and pointed to her. She cried as she handed the auction employee her $5,000 cashier's check to seal the deal. And, of course, she cried as she filled out the bank loan forms.

Todd, 44, purchased her first house -- a four-bedroom, 2 1/2 -bath split level in Clinton. The house was valued at $490,000. She paid $215,000 and signed up for a mortgage with a 5 percent interest rate. After 20 years of living in an apartment, she and her 16-year-old son, Rodtico, will be able to move into a house.

"This is my Christmas gift to myself," Todd exclaimed, tears running down her face as she stopped to hug strangers in the hallway. "Everybody I know has a house. My sisters, my brother. My friends. And now me. Finally."

Todd, a District-based senior researcher for a mortgage trade publication, was one of about 800 potential buyers at the convention center yesterday.

The auction moved quickly, with a tuxedo-clad auctioneer spitting prices and taking bids fast enough to sell about 40 houses an hour. In the audience, six energetic assistants, several blowing police whistles or throwing back energy drinks, helped the auctioneer identify bidders and encouraged them to go higher.

Some of the bidders made offers over the Internet.

The auction managers took care of financing, as well. Loan officers from Countrywide, Chase and Wells Fargo were busy running credit scores to see if successful bidders really had the means to close the deal. Those who qualified and had their $5,000 cashier's check ready got the keys to the house.

"If you have a credit score of 580 and you can put 3 percent down, you're in," Bowie ReMax agent Arouna Koroma said as he scouted for prospective buyers.

While many who attended the auction were purchasing homes to live in, some were looking for investments.

Steve Daly, 44, Mark Daly, 46, and Joe Lorentzen, 47, paid $252,000 for a three-bedroom, 1 1/2 -bath house in Crofton that was listed at $389,000. They plan to rehabilitate the house and have it ready to rent by April.

Successful bidders pay a 5 percent commission to Real Estate Disposition, part of the reason the auctioneers try to get top dollar for the houses. A company spokesman said the next auction in the District will be during the first quarter of next year.

The auction process does not always produce satisfied customers. Last summer, Real Estate Disposition, along with several other foreclosure auction companies, was sued by a California couple who said that the companies participated in a "bait-and-switch scheme."

Auction spokesman Rick Weinberg said that because the June lawsuit was a class-action suit, his company was thrown into the suit with other auction companies. "It's not specifically against us. We certainly don't participate in bait-and-switch," he said. "There's nothing illegal that goes on in our practice."

Will Sheppard, 36, of Greenbelt said he could identify with the California couple's anger. For more than a year, Sheppard had been tracking a six-bedroom, five-bath house in Dover, Del., one of the few houses outside Washington, Maryland and Virginia that were being sold at yesterday's auction. The house was valued at $980,000, with bidding set to begin at $149,000. But when Sheppard arrived at the convention center yesterday, the auctioneer announced that the Dover house and about a dozen others were dropped from the sale.

"I think they had intentions to really auction it off, but the bank probably decided that was too low," he said. "I'll just keep watching it to see what happens."

News researcher Magda Jean-Louis contributed to this report.