Buyers Flock to Foreclosures, but Deals Are Often Delayed
Monday, April 13, 2009
Anxious to meet the bank's demands for quick action, Andrew Garcia and his fiancee, BethAnne Hoffmann, rushed to find financing to buy a foreclosed-on house in a lovely tree-lined Baltimore neighborhood.
That was in January.
A month later, the bank that's selling the house broke its own closing deadline. The couple has been in limbo since. In frustration, they turned to their congressman's office for help. Only then did they receive an apologetic call and a new proposed closing date of April 24 -- but still no signed paperwork.
"It's unbelievable. With all we hear about all the homes out there that need to be sold, I have to call my congressman in order to purchase a house," Garcia said. "If that's the process, there's no way we're going to clear all these foreclosures."
As bargain hunters turn their attention to foreclosures, many are discovering the toughest challenge is dealing with the banks that repossessed the homes. These banks are usually quick to accept a bid and write a contract. But the closer buyers get to the settlement table, the greater the potential for bureaucratic bungling and the chance the buyers will give up.
The housing market stands little chance of recovering until the foreclosures are sold. Distressed properties make up roughly a quarter of U.S. homes for sale. Moving them would go a long way toward stabilizing home prices. But working with the banks, which are typically based far from the homes they're selling, is not as simple as buying from a regular homeowner.
"Things go wrong, and it takes the bank a lot longer to deal with them," said Vivianne Couts, a Virginia real estate agent. "There are a lot more people involved, many more layers. The Realtor can't always call the bank and say, 'What's going on here?' "
Garcia and Hoffman, both first-time home buyers, realize that now.
When their closing date passed and no one could explain the delay, they started digging into court records. They learned that days after the bank had repossessed the home, the previous owner had filed for bankruptcy protection. Garcia said all the bank needed to do was submit paperwork to the court confirming that it had foreclosed on the house prior to the bankruptcy filing. But that letter didn't materialize until their congressman, Rep. John Sarbanes (D-Md.), intervened.
The bank, CitiFinancial Mortgage, declined to comment on the case. But Mark Rodgers, a spokesman for Citi, said the company tries to handle closings expeditiously. "If and when there is a delay, we regret any inconvenience to the customer," he said.
Garcia and Hoffman feel stressed. The lease on their apartment runs out this month. They do not understand why the bank didn't jump to unload the property, especially because they offered nearly $5,000 more than the $170,000 asking price.
"I can't believe we had to bring this [bankruptcy] to everyone's attention," Garcia said. "It's as if no one did their homework on this property and when they found out there was a problem, they were like, 'We'll get to it. We'll get to it.'"