Foreclosures are about 40 percent of Jonathan Benya's business -- either representing the banks or working with buyers. Benya, a Realtor with Century 21 New Millennium in La Plata, chatted with me recently about why he got into real estate after the boom and some of the wildest things he's seen inside bank-owned homes.
He usually works from Annapolis southward, though he's represented foreclosures farther north in the Baltimore area as well.
Q: How long have you been a real estate agent?
Licensed, I've been in the business for two years. (My mother has been in the business for 12 -- I worked with her as her assistant for a time.) …
It was a simple twist of fate, really. I used to do audio engineering work for a band, and I had an accident on the job where I broke my fingers in 23 places. I decided it was time to get out.
Q: Holy cow -- how did that happen?
Backstage, after a show. … I got in [real estate] right as the market was tanking, which might be less than opportune, but when you get lemons, you make lemonade.
Q: What's the lemonade?
Foreclosures. … Everybody wants a foreclosure right now. Even when they don't want a foreclosure, they think they want a foreclosure. If I had a dollar for everybody who said, 'I want a foreclosure for half-price that needs no work,' I'd be a rich man.
The problem with foreclosures is, it's always a double-edged sword. They always need some work.
Q: What sort of condition are the foreclosed homes usually in?
Generally, you see situations where they may need appliances -- when the owners move out, they may take the appliances with them. [The house] may need to be repainted. I've seen extreme cases where the houses have been completely flooded out. …
Banks, of course, don't want to spend that kind of money to repair the properties. They want to sell them as-is. But I've seen them as bad as entire exterior walls missing due to fire. … I've seen severe vandalism, where people have cut the carpets short three inches along the wall on every carpet in the house. People get vindictive. Understandably so. In a lot of cases, these people got put into loans they never should have been given. The loan officer fudged information.
Q: Are problems usually caused by the previous owner or more often the result of a house sitting empty?
It's a combination of both. Typically, there's almost always some concern related to the previous homeowner. Whether that be that the carpets have been stained to the point that they need to be replaced, or the walls have been damaged or marred when they were moving out -- because there's no incentive to keep these properties in habitable condition. So typically I almost always see something that is likely related to the previous owner, but those may not be major concerns. They may be so minor that they might not even affect FHA or VA loan approval. But this time of year, with the cold weather, when you have pipes burst, that becomes a major problem.
Q: So that was the cause of the flooding you've seen? Or previous owners turning on the taps?
I've seen both. I've seen situations where people have intentionally stuffed sinks and left foreclosures to flood. Amazingly enough, there are investors willing to purchase those properties. If the bank prices it right, they'll still move. It all comes down to price. You can sell almost any piece of real estate, provided it's priced to sell.
Q: What sorts of homes are they, these foreclosures?
We've got one in Columbia for $1.6 million. It's really hitting everywhere. When it first started exploding on the foreclosure market, it was traditionally your newer homes that were purchased with these exorbitant ARMs. As it got deeper, you saw older homes coming up. Now you're seeing luxury higher-end homes come up. It's not just junk loans. It's job loss ... [and] a lot of people treated these homes like their piggy bank. When it all came crashing down, they were left holding the bag.
Q: What's the most surprising thing you've ever seen when you walked into a foreclosed home?
The most surprising thing? Well, that's kind of a tossup.
I went with a Realtor friend of mine to one property to find squatters and a possible meth lab.
We found one house that had been sitting vacant for two or three weeks with a pit bull in the basement. Pit bull was still alive, just not very happy. They'd left a five-gallon bucket of water and a bag of dog food. The dog had enough to survive but the house didn't smell very good.
We had one situation where [a foreclosure] … had been condemned because the fire department had to pump it out. The water was seeping out the windows in the first floor, so you can imagine how high the water was in the house. Pretty much ruined everything. The water had started from a stopped-up sink in the master bath on the top level. And we'd managed to sell it rather quickly. We priced it competitively and had multiple competing offers from investors on it.
The walls had turned completely black from mold. There were mushrooms growing on the carpet in the basement. It was absolutely incredible.
Q: What do buyers need to know if they're thinking of getting a foreclosure from a lender?
You have to understand that a property is being sold strictly as-is. Even if the property's in good shape, if it's missing, for example, a washing machine or a stove or something like that, that may be enough to prevent FHA or VA financing. VA's a little stricter than the FHA, but even so, if you're missing major appliances, it will not be funded.
Q: Even if the buyers purchase the appliances themselves?
I've seen situations where that has happened -- where potential buyers have purchased items in advance and had them in the property for when the FHA appraiser comes in.
Q: Are most lenders working well with buyers to move foreclosures off their books, or not so much?
It really depends on the lender and how good their legal department is. I still see situations where the deeds are not properly transferred or recorded and you're stuck as the buyer waiting for that to happen. ... With some lenders, they don't seem to be able to get on the ball. Particularly if there was a bankruptcy. If the previous owner files bankruptcy, depending on when they file it, it can really snare up a foreclosure. You can find yourself waiting for a lender to get their act together. And there's some lenders, you can purchase a foreclosure and within two weeks be moving in.
Q: But overall, is it simpler for people who want to buy foreclosures than it was when you started two years ago?
I feel like it's getting simpler, because the banks by and large are moving their properties more efficiently. They are generally paying more attention to time on market and list price, and some of the lenders have become very aggressive about dropping the price on properties quickly to get them sold.
The one thing people should bear in mind is, if they see a property they like that's grossly overpriced, it's no skin off their Realtors' nose to write an offer. ... If the house is listed for $300, you write an offer for $150, the worst they can do is say no. If you're lucky, they'll write a counteroffer.
I don't want to say it's the norm that they would accept something like that -- quite often they're not going to consider a counter on something like that. But if the situation is right -- hopefully your agent would be able to identify those situations -- you may be able to get away with it.
These are toxic assets on their books, and they need to move them. The banks aren't willing to give away the properties, but they don't want them to sit for a year or two years.
Q: How many foreclosures are you working with?
Typically with the banks, I'm seeing requests for price analysis come in about four or five times a week. I may list 20 percent of those properties, so I may pick up one listing a week for a foreclosure. With sales, generally averaging about two to three new buyers each week, one of which may be able to qualify. So we probably do about two to three buyers each month.
Q: Many buyers are having qualification problems, then?
Absolutely. The high credit requirements have really pinched a lot of people. I've seen people who have sat on the fence too long and have watched the credit score requirements pass them by. People who could have purchased six months ago can't purchase now. ... Until the credit requirements lax up, which I don't see happening, that's just the way it is.
I have several clients who are actively working on credit repair. If you're sitting within 20 or 30 points, you can easily get moved up within six months if you pay down your debts and don't make any big purchases.