Foreclosures still creating market opportunity for Realtors who specialize

The end of the process for many of those homes is to enter the open market.

And when they do that, they’re competing with non-foreclosure listings, putting price pressures on all properties as the banks seem to race to set a low enough price to get a fast deal.

In many areas of Washtenaw County, that's meant price drops of 30 percent. In many cases it's dramatically higher.

But there are pressures in the real estate industry, too, as Realtors grapple with the level of work, communication and financial skills needed - in most cases - for their buyers to end up with a foreclosed home.

On the other end of the deal, though, in many cases in Washtenaw County are Realtors who saw the opportunity to invest their time to become foreclosure market experts before the market exploded.

Two examples: Susan Fecteau of Treehouse Realty Group in Ann Arbor and Clark Brown of Ehman & Greenstreet University GMAC in Ypsilanti.

They steered their own brokerages into the foreclosure markets years ago, positioning them with lenders to quickly deal with the waves of homes that hit the market since 2007.

They’re joined by many others in the local real estate industry - and some agents from outside brokerages who end up doing business in Washtneaw County.

Working with lenders to list foreclosures had to become a regional specialty, given market turns that many of us didn’t even see as it was starting. For example, I got my first explanation of a growing foreclosure business in about 2004 during a visit to Edward Surovell’s office.

But how much does foreclosure work really drive the industry right now?

Both Fecteau and Brown are indicators.

They are brokers, running their own companies.

They also list, and years ago they formed relationships with banks to do foreclosure work in the days when the process wasn’t common knowledge to the rest of us. Their listings, by now, can be dominated with those homes. And they also work with buyers.

Then, in 2009, their work with foreclosures powered them to the top of the Washtenaw County real estate market. Numbers tracked through the Ann Arbor Area Board of Realtors pushed them into the top 10 in dollar volume - each of them recording at over $15 million in sales in 2009.

Total sales were higher, since both worked on transactions outside of Washtenaw County’s listing service. The numbers also include their team members who contributed to their sales.

They’re also notable because their unit sales, by the AAABOR measure, are the top two in the county: 210 for Clark, 182 for Fecteau.

So in a business where everyone involved is working harder for less money, these foreclosure experts - and the others in the county who have carved out a specialty - may be at the extreme end of that spectrum.

They’re working with some of the lowest prices in the region.

Yet as Fecteau says: “The dollar amount doesn’t matter. You do just as much work on a $5,000 transaction.”

It doesn't always come down to commission. There are the other elements. It's hard to navigate distant banks. The foreclosure experts tackle short sales, too, when a home is listed for less than an owner owes the bank.

There are human elements, too: "It's very hard for people to negotiate and make decisions when they're in a desperate situation," Fecteau said.

Brown says his team sold a total of 220 houses in 2009. He looks back on 2005, when his average sale price was about $175,000. Over the past year, he’s had more listings in the $10,000 range than ever.

“I’ll be lucky if I hit $70,000 this year,” he said of his average sale.

That means he needs to sell 2.5 times the number of homes to stay at the same level of revenue.

For that reason, betting on foreclosures was a tough call for these brokers.

Yet - as the numbers show - it’s also been enough to send them into the top of the market.

It also might keep them - and the other Realtors and brokerages who target foreclosure business - active in 2010.

The AAABOR launched a foreclosure designation late last year, giving its members the chance to note which properties were bank-owned and adding to the search capability on the buyer-representative end.

Nancy Merdzinski, CEO of the AAABOR, says that designation isn’t tracked by the board, though members seem to be utilizing it.

She also calls working with foreclosures “time-consuming, draining and unpredictable” for the agents who specialize it them.

Watching the local numbers, as tracked through the sheriff’s deeds recorded in the Washtenaw County clerk’s office, foreclosures hit a high here in 2008 when 1,439 homes reached the point in the foreclosure process when the home was sold at sheriff’s auction and the owners were left with a redemption period.

The year before, 1,151 homes hit that point. And in 2009, the number fell to 1,196.
The local spike started with just a few hundred extra homes going to sheriff’s sale in 2005.

Yet before we can forecast that trend to be tapering off, the local market also got a little jolt in January, when hit a nine-year high for that month, with 113 homes entering foreclosure.

If those houses enter the resale market after the redemption period, we’ll have just as many bank-owned homes on the market, competing on price with “regular” resales.

And the number of foreclosure sales - with all of their effects - will continue to dominate a big proportion of the market.

Paula Gardner is Business Director of AnnArbor.com. Contact her by email or follow her on Twitter.