Selling a Home at Auction
Boston Globe Article November 16, 2010
HOMES GOING . . . GONE
Foreclosure auctions in Mass. at record pace Public process often painful for the owners
Author: Megan Woolhouse
MALDEN - The owner of a modest three-bedroom house on Beachview Avenue saw her long struggle to save her home end in a devastating 15 minutes. That's all the time it took one recent afternoon to complete the foreclosure auction, one of thousands happening on the lawns and sidewalks of Massachusetts homes at a rate of about one every hour. Sotheby's this is not.
About a half-dozen representatives of potential buyers milled out front. Dressed mostly in jeans and sweatshirts, they snapped photos with cellphone cameras as curious neighbors watched. The homeowner, too embarrassed to stay, had sought refuge at a nearby coffee shop. "I don't want to be here when it happens," she said minutes earlier. The auction itself went quickly. Five minutes and two bids later, the house was sold.
While much of the real estate industry has gone digital, foreclosure auctions survive as a throwback to centuries ago. Massachusetts law requires auctions to be held on-site under the purview of a licensed auctioneer. A few auctioneers still break a tree branch to prove they were present, a custom rooted in English common law. The land-takings - often postponed multiple times - usually result in a lender owning the property. That's because bids come in too low or there aren't any prospective buyers. But either way, a foreclosure auction is a humiliating experience for the homeowner, whose financial ruin is on public display. Auctioneers said they try to handle the proceedings with diplomacy and discretion. "We're very, very sensitive to these situa tions," said Marianne F. Sullivan, an auctioneer and the president of Sullivan & Sullivan Auctioneers LLC, a Boston firm that holds more than 100 auctions a month.
As the state's foreclosure crisis drags on, auctions are taking place at a record pace this year. Before the housing market collapsed, only a handful of foreclosure auctions were held each day across the state. But by the end of September, nearly 11,000 properties had been seized - 58.6 percent more than during the same period last year and more than in all of 2009, according to Warren Group, a Boston firm that tracks real estate. Bay State Auction Co., which sold the Malden house, had scheduled 23 foreclosure auctions that same day. In one important way, however, the Beachview Avenue auction was unusual: There was a buyer, a lanky, gray-haired man who successfully bid $268,000.
So far this year, about 80 percent of deeds filed at foreclosure auctions have gone back to lenders, according to Warren Group. There are two reasons for the buybacks: Banks generally won't accept bids for less than what is owed on the mortgage, and potential buyers, still unsure about prospects for home values increasing, are not willing to pay that much. Jim Robertson, a Boston developer who regularly attended auctions - a legal notice announcing each one must be published in a local newspaper - said bargains are hard to find. "I went to the auctions for a solid year and it ended up being a waste of time," Robertson said. "The banks essentially weren't selling them." Gary Klein, a Boston housing lawyer who works with homeowners trying to avoid foreclosure, said it does not have to be this way. Too often, lenders foreclose when it would serve everyone better if they worked with homeowners to modify a mortgage, he said. . By lowering monthly payments or making other adjustments, Klein said, banks would not be stuck with unwanted properties, and more people would be able to stay in their homes.
"What's crazy in this market is there continues to be a rush to foreclosure even though there's no market for the properties," he said. At a foreclosure auction of a tidy Cape-style house on John Street in Revere last Wednesday, six potential bidders showed up. Most declined to comment and shied away from a photographer. One covered his face with the hood of his sweatshirt. Auctioneer Mary Scimemi opened the bidding at $177,000. A bank representative responded with an offer of $176,000. The cast of would-be buyers murmured into cellphones, consulting with their backers. Most people who come to auctions are not private citizens looking for a home, but representatives of real estate investors hoping for a deal. "Going once? Twice? Three times?" Scimemi asked. "Sold back to the bank!" she declared after a pause. Inside, Benjamin Palencia, his girlfriend, and her 3-year-old daughter ate lunch. Palencia said they have lived there for five months, renting it from a friend. "I didn't know he had a problem with this house," Palencia said, adding that he isn't sure whether he will be evicted, or where he might move.
In 23 states, lenders must receive approval from a judge before foreclosing on a home. That's not the case in Massachusetts, where owners learn about auctions through certified letters from lenders. Homeowners have few options, unless they can afford to hire a lawyer and file a lawsuit to dispute the land-taking. At another recent auction of a well-kept Cape on Belnel Street in Hyde Park, Scimemi - the auctioneer who works for Bay State Auction - was surrounded by a crowd, including a group of activists from City Life/Vida Urbana, a Jamaica Plain nonprofit that regularly protests foreclosures. The group is angry at banks for not doing more to help people keep their homes, and is upset at investors who, they say, are trying to take advantage of someone else's misfortune. The activists held signs, and one protestor, Marshall Cooper Jr., yelled: "That's right. Take a walk investors, take a walk brother."
There were two potential bidders in attendance but neither countered the offer of the lender, Beneficial Massachusetts Inc. It bought the property for $174,000, and the homeowner will now face eviction. At the Malden auction, the ending was far different, but no less dramatic. The gray-haired mystery bidder who bought the Beachview Avenue house turned out to be the homeowner's father. He put down a $5,000 nonrefundable deposit, and has 30 days to pay the balance, helping his daughter avoid becoming another foreclosed owner looking for a place to live.
Megan Woolhouse can be reached at email@example.com.
Credit: Megan Woolhouse, Globe Staff