On Sunday afternoons, while some Dallasites nap on the sofa and others catch up on a week’s worth of newspapers, others climb in their cars and window-shop the American Dream. Driving through subdivisions of newly minted houses, couples contemplate the possibilities and calculate the notes. If the subdivisions aren’t as shiny as they once were, thanks to a languishing economy and the savings and loan crisis, the floundering developments hold another kind of promise for a certain breed of shopper: the possibility of finding a home and a bargain.
On just such a Sunday afternoon last fall, one Dallas couple cashed in on that promise. Driving through a limping-along West Piano subdivision, the executive and his wife saw their dream home-a four-bedroom custom with sprinkler system, security system, landscaping, and a pool. The home, however, lacked carpet, appliances, and interior finish because its builder had gone under before completing the house. A bank now owned the structure, which was slowly deteriorating due to lack of maintenance.
Originally to be sold at $300,000, and surrounded by other homes in that price range, the house was now not even listed for sale because it was incomplete, needing approximately $20,000 worth of ’”finishing” work. The executive, armed with a little research and his own appraiser’s report, negotiated a deal with the bank himself. A month later, he and his family moved into their dream home. Price paid: $184,000.
That Piano home was one of thousands of “hidden houses” in the Dallas area. Not all are new, or in struggling developments; these houses come with greatly varying price tags and can be found throughout the Metro-plex. Hidden houses share little in common beyond the fact that they are often unlisted and unadvertised- and seldom found through traditional routes. No one agency tracks house availability, and in fact, many agencies do not communicate with each other. Some are actually adversaries.
Most individuals enter the house-hunting arena unaware of this untallied market or uncertain about how to tap into it. They usually rely heavily on realtors who in turn rely heavily on the Multiple Listing Service (MLS), an inventory of about 21,000 openly for-sale properties in the Dallas area. While that’s certainly a huge slate to choose from, the figure may represent less than half of the available homes. Thousands more wait in the wings, held by financial institutions, defunct builders, and government agencies.
If you’re in the market for a new home, you owe it to yourself to check out the hidden-house possibilities. A general survey of sources, and how to contact them, follows:
●Financial institutions like NCNB, Sunbelt Savings, First Gibraltar, and AmWest now own large inventories of property categorized by a label known to few prior to the foreclosure boom; REO (real estate owned). Much of this property is in the form of mortgages bogged down in the circuit of foreclosure, market preparation, and government red tape.
The REO of AmWest Savings, formerly Olney Savings and Loan, is not untypical. AmWest assets manager Robert Scott reports that his institution has approximately 280 single-family Dallas-area houses in its REO inventory.
While many lenders list their REO properties with realtors, some do not. But interested individuals can contact lenders’ REO departments directly, and will often find them quite willing to provide their inventory lists. Be forewarned, however, that some lenders are less aggressive than others at marketing their inventory. They are guaranteed, by the government, to reap a profit if they don’t “dump” properties into a free-market situation. Sometimes this profit may be all that keeps a bureaucratic job secure or a balance sheet in the black. Should you encounter resistance, remember that persistence pays off.
●Not all of the unsold homes in flounder ing developments have ended up on the REO lists of local lenders. In some cases, dis tressed builders have large inventories of houses, incomplete and unmaintained. (One such builder has thirty-five unsold houses “that have not been foreclosed on even though I have not made any mortgage pay ments for eight months.”)
Tapping into this hidden inventory may be as simple as looking for ill-maintained yards fronting new, vacant houses, calling the number on the builder’s sign, and negotiating a price.
● Negotiation is less an option for proper ties held by the government, which, through its involvement in the housing and banking industries, is perhaps the largest holder of “hidden houses.” Many of these houses are available through HUD, as a result of failed FHA and VA loans. The Dallas/Fort Worth area has recently earned the dubious distinc tion of leading the nation in foreclosures on VA and Fannie Mae (Federal National Mort gage Association) properties. Realtors often show HUD listings, but for other market- ready properties, you may need to contact the agencies directly. Fannie Mae and the Federal Home Loan Mortgage Association (Freddie Mac) can provide a listing of properties, some available complete with financial assistance. Fannie Mae even offers a toll-free search line-(800) 553-4636-and will send callers a list of homes in the Dallas area and a free booklet on how to purchase foreclosed properties.
The latecomer in the foreclosure boom is the Resolution Trust Corporation (RTC), created by Congress in 1989 to liquidate assets from failed savings and loans. The RTC is charged with selling everything from single-family homes to resort hotels to works of art, and according to a recent report, holds about 6,000 homes in Texas alone. Many of those are in the Metroplex.
The government gives huge discounts to major investors buying large packages of properties (50 percent and more as opposed to 5 percent for you or me), but there is still some incentive for the individual. Interested parties calling the RTC’s toll-free line-(800) 431-0600-will be given information on the agency’s listings.
●When the Drug Enforcement Administration raids a drug dealer’s home, it’s often getting more than an arrest-it’s getting a piece of the real estate market. Law enforcement agencies may seize property if a link between the property and crime can be proven. Among the seventeen Dallas-area properties seized by the DEA last year was a $573,000 North Dallas mansion.
DEA properties, and those seized by other law enforcement agencies like the Texas Department of Public Safety, U.S. Treasury, the FBI, and the IRS, are often sold at public auction. Information on these properties can be obtained from the agencies.●Prior to the foreclosure boom, before building busts and government seizures, the true “hidden houses” were those sold by their owners. Reluctant to pay a realtor’s commission, owners stuck a sign in their yard and a classified ad in the newspaper and hoped for the best.
Former realtor Buck Savage, president of the For Sale By Owner Club, says no one source provides overall statistics for his segment of the market even now. But, he believes, “there’s a revolution going on.”
In the past few years, organizations like his have sprung up to match homeowners with potential buyers: the owner gets help advertising his home, the buyer gets steered toward the type of property he’s interested in, and both get assistance in navigating the sometimes tricky legal straits.
“The fee |at FSBOC it’s $986, paid by the owner] is the same whether it’s a milliondollar house or a $40,000 house,” points out Savage, who says hard economic times have helped people overcome their fear of going it alone, without a realtor, in order to save the realtor’s standard 6 percent commission.
Foreclosure Clearing House helps narrow the search for house hunters interested specifically in foreclosure property. The four-year-old Dallas company maintains a listing of foreclosed homes, townhomes, and condos, and after determining budget and location requirements, matches the client with the lender handling a suitable property.
These new services are two facets of a real estate market drastically altered by economic upheaval. Realtors have had to adapt, and a new faction of buyer-representative realty firms (traditionally, realtors represent the seller) is helping to change the way people buy property. Change is in the air-much of it working to the advantage of today’s house hunter, who, if armed with a little research and a willingness to negotiate, has more options than any who have gone before him.