An estimated 4,000 people will hear the word “sold” in Boston this weekend.
That’s how many are expected to attend a two-day auction of more than 300 foreclosed properties at the John B. Hynes Veterans Memorial Convention Center.
The auction, thought to be one of the largest to take place in Massachusetts in recent years, has the local real estate industry buzzing.
“I think it’s a great thing, personally. It’s going to get a lot of people off the bench and hopefully into the playing field again,” said Linda Kody, a North Andover real estate broker who handles foreclosure sales. “I’m hoping it will give a little jump-start to the market as we head into winter.”
Single-family homes, condominiums and multifamily properties from throughout the state will be auctioned. But more than a third – a total of 116 – are concentrated in eight communities: Lawrence, Lowell, Springfield, Worcester, Lynn, New Bedford, Brockton, and Boston’s Dorchester neighborhood.
Foreclosure activity statewide has more than doubled in the last two years, according to The Warren Group, parent company of Banker & Tradesman.
Lenders filed 18,546 petitions to foreclose, the first step in the foreclosure process, through August of this year. That’s 152 percent more than the 7,351 petitions that were filed during the same months in 2005.
A wave of foreclosures has hit cities like Lawrence and Lowell particularly hard. In Lawrence, foreclosure activity shot up 148 percent from a year ago.
A total of 479 foreclosure petitions have been filed through August in Lawrence, up from 193 a year earlier. In Springfield, 936 foreclosure petitions were recorded during that period, up 64 percent from the same months in 2006.
Some states are dealing with the spike in foreclosures by hosting auctions. Large-scale auctions have taken place in states like Florida, California and Texas this year. While auctions including fewer properties have occurred in the Bay State over the last two years, Massachusetts hasn’t been quick to embrace the strategy, according to local auctioneers.
“Lenders have been doing online auctions for about a year in this state, and in other states they’ve been doing it longer. It’s been a big success in other places. They’re trying to do the live auctions that they do everywhere else, but I’m not sure that’s going to be hugely successful either because Massachusetts hasn’t accepted auctions yet,” said Donna Brooks, a Leominster real estate broker and auctioneer. “We’re not used it to yet. We’re very slow to accept things here.”
Real Estate Disposition Corp., a company based in Irvine, Calif., is conducting the auction. This is the first time that REDC is holding one in New England, according to Michael Schack, the company’s senior vice president.
The auctioneer has been advertising the event in newspapers and on television for the past four weeks. As of last Wednesday, 1,731 had registered to attend, and the REDC Web site featuring the auction properties has been viewed nearly 87,000 times.
Advertised minimum bids are hundreds of thousands less than some properties’ listed value. A 1,196-square-foot Colonial in Brockton previously valued at $226,100, for example, has a starting bid of $59,000, according to the REDC Web site, www.ushomeauction.com. On Cape Cod, a 1,248-square-foot home in Hyannis previously valued at $326,600 includes a minimum bid of $49,000.
“I think the minimum bids are set to create interest – to get people to the properties and to get people to the auction,” said Kody.
‘Creating an Excitement’
Brooks noted that some winning bids ultimately may be rejected by the seller. That’s because lenders typically have a minimum price that they’re willing to accept – called a reserve.
Open houses for the foreclosed properties took place during the past two weekends. Twenty-nine properties that are occupied were not open to the public, according to Schack.
Schack said he could not identify the lenders or investment firms that own the foreclosed properties.
“That we do not disclose to the public,” said Schack, noting that as a broker, REDC has a fiduciary responsibility to the owners. “The sellers prefer not to have their name out there.”
REDC primarily deals with large, publicly traded institutional entities.
Brooks said one of the sellers is Countrywide Home Loans. Brooks, who owns The Boss Realty Group and Brooks Auctions in Leominster, has been trying to sell five foreclosed Countrywide homes that are on the auction block this weekend.
Two of them are in such poor condition, according to Brooks, that they weren’t open to the public this past weekend.
“Most of these that are going to be auctioned are aged properties that lenders are trying to get rid of before the end of the year,” she said.
A search of court records shows that, Deutsche Bank National Trust Co. and Wells Fargo Bank are among the entities that have foreclosed on some of the properties in the auction. Deutsche Bank typically acts as a trustee for larger mortgage investors.
Like Brooks, Kody has been trying to sell six properties that will be auctioned. Kody plans to attend because clients are asking her to scope out a few properties. She expressed hope the auction will help get some distressed homes off the market.
“It’s creating an excitement and it’s good to see some excitement in the market,” said Kody, who recently taught a class on purchasing foreclosed properties at a local community college.
Countrywide Home Loans will be on site this weekend to provide financing to successful bidders. There will one or two other lenders at the auction as well, according to Schack.
Countrywide was chosen as a preferred lender because it is one of the top six lenders in the country, said Schack. “We thought it was a good match to have them working as the preferred lender, and that they would offer a good variety of loan packages and options for our customers,” he said.
Bidders can use their own lenders. However, they run the risk of losing their deposit or facing additional fees if they have trouble obtaining financing and can’t close within 21 days after the auction.
“If you use the preferred lender Â… and there’s an issue that comes up in the process of getting a loan, that won’t be held against you,” he said. “If you need to extend [the closing] period, however, third-party financing is not a contingency of the transaction.”
Bidders must bring a $5,000 cashier’s check and checkbook. Successful bidders can use the $5,000 toward a deposit. Five percent deposits are required on first purchases and 15 percent for multiple properties.
Schack said the auction is unlike a foreclosure sale because prospective buyers have the opportunity to tour the home before purchasing it, obtain title insurance, secure financing and go through the full escrow process, and receive disclosures that are required by law.
