Foreclosure: A sign of the times

Realtor Leanne Smith opens the lock box on a foreclosed home in Sonora. Amy Alonzo Rozak/The Union Democrat, copyright 2009

It’s not a gimmick.

Called “cash for keys,” it’s one of the more unusual manifestations of the Mother Lode’s faltering real estate market — one that has left many homes thrashed, forced yet more people to move and even abandon their belongings, and left some real estate experts stung by their own success.

It’s all becoming more common as the number of foreclosures rises in Calaveras and Tuolumne counties. Both counties are on track to break past records dating, respectively, to 2000 and 1996.  

It’s not just homeowners that are suffering. County governments that rely on the taxes generated from property taxes are also getting hit.

“A decline in the total net taxable value in Tuolumne County is something that has not happened during my 30 years in the Assessor’s Office,” Tuolumne County Assessor-Recorder Ken Caetano said, in reflecting on new figures showing a falling assessed county value. “The driving force behind the decline has been the sharp turnaround in the real estate market.”
Cash for keys

For money-strapped homeowners in the middle of foreclosure proceedings, and those who are looking to make a fresh start, Foyil’s cash-for-keys offer is hard to pass up.

“Some of these people have been in their homes for three, four or five months, knowing what’s coming,” said Foyil, a real estate agent for Coldwell Banker in Sonora. “When I tell them the bank is offering money, they’re so grateful.”

The transaction, Foyil says, is cheaper than going through the legally difficult and expensive eviction process and paying professional cleaners and contractors to make the home marketable.

It’s not uncommon for banks to put tens of thousands of dollars into foreclosing, cleaning and repairing homes, Foyil said. That can be a tough proposition for banks in today’s down housing market.

Not all homeowners are happy to see Foyil standing on their front porch — even when she offers them a check.

For many, the money is not enough incentive to move a lifetime’s-worth of possessions and pay the deposit and rent on a new place.

Squatters

Sometimes, people simply move, leaving their possessions behind.

More often, they sit and wait for the byzantine foreclosure process to play out.

Once the property, if it fails to sell at auction, is back in the bank’s hands, the former homeowners essentially become squatters.

Eventually, if they wait long enough, sheriff’s deputies will forcibly remove them.

That doesn’t happen often, but deputies can be regular visitors, as they generally serve homeowners with foreclosure-related legal papers before they are evicted.

Sgt. Jim Oliver does that job for Tuolumne County. When he serves notices, he encounters a whole range of reactions.

“I have had people who have not moved a thing and think it’s a joke,” he said. “Sometimes, you get people who are upset.”

He tries to distance himself from the homeowners’ personal drama. Occasionally, he said, he does feel sorry for them.

“Generally, we just go out and act professionally and do our job,” he said.

Oliver’s duties may slow down a bit in the coming weeks, as a new state law — the California Foreclosure Prevention Act — requiring banks to work with homeowners for up to 90 days went into effect June 15.

But some real estate experts, like Leanne Smith of Century 21 Tri-Dam Realty in Angels Camp, say the new law will merely postpone the inevitable.

“I was hoping we’d be done (with the down housing market) by next year, but now this is just going to go on longer,” Smith said.

The type of people getting evicted from their homes is changing also.

The first wave of foreclosures largely hit people who were considered high-risk borrowers — lacking solid credit or income, or both.

But lately, as the economy has worsened, Smith has seen newly unemployed people who once had stellar credit and good jobs — who had secured their homes with prime loans — caught up in the foreclosure mess.

People like herself.

Even Smith, with all her expertise, was not immune from the housing bubble’s collapse.

She faced foreclosure last year, when things started to get really bad in the housing market. Her former home, in Vallecito, recently sold for $219,000 after months on the market. That was $30,000 less than the bank was seeking.    

“I’m 100 percent accountable,” Smith said. “I was just like everybody else — wow! — look at this low payment. I was thinking: I’ll refinance. That’s what everyone was thinking.”

People assumed home prices would continue to rise, leaving owners able to sell their homes quickly at a profit or refinance to a better loan, Young said.

But following the housing crash, new home loans and refinancing could not be secured by many people. Without the flow of easy money, home prices dropped.

“By and large, it has to do with the reversal of the market,” Young said. “People don’t walk away from equity.” 
 
Trashed homes  

On the way out, many homes become an outlet for homeowners’ financial frustrations.

Smith and Foyil have seen several vacant homes full of trash, and even homes that have been stripped of fixtures and appliances.

“I had one house in Tuolumne County where the whole kitchen was gone. Imagine the work involved,”  Foyil said.

“People are angry, and they’re taking it out on the banks.”

When the homes are in really bad shape, the banks — with real estate agents acting as an intermediary — hire people like Scott Jones, of Jones Construction, based in Calaveras County.

Jones is both a victim and benefactor of the housing mess.

He worked as a home builder during much of the housing boom. When the bust came, however, the work on new homes dried up.  

 So he found a new niche in helping banks fix up foreclosed homes. He still gets a chance to put his construction skills to work, but much of his work now deals with landscaping and clearing homes of trash, both inside and outside.

He said he hasn’t seen too much large-scale vandalism, or people leaving possessions behind. But he’s seen a lot of debris — both inside and outside the homes.

“For the most part, people have left their houses with a lot of trash — literal garbage,” Jones said.

Buyer’s market

In the midst of all the housing chaos, Smith finds some good news: Homes are becoming affordable.

This gives many young California families — once locked out of the market — a chance to own a new home, she said.

Smith recalled the satisfaction she’s experienced recently in helping young couples find their first home at a good price. It’s an experience that was lacking during the housing boom, when prices in some parts of the state were double what they are now.

In Tuolumne County, the median home price sits at $248,000, down from $339,000 in the spring of 2005, the peak of the housing boom. In Calaveras County, the median home price is $218,000, way down from the peak of the housing boom when many homes there were going for over $300,000.

Although it’s a buyer’s housing market, Young pointed out that not everyone can find a home anymore, as mortgages are being given only to the most qualified applicants.
 

And that’s probably the way it should be, she said.