Wheel N’ Deal
The recent phenomenon has been greeted by some with jeers, but agents say it’s an opportunity for prospective buyers.
April 27, 2008
By CHIP JACOBS
Special to The Times
THE burly, young marketer in the crisp white shirt rose to speak, and 20 seated passengers leaned forward to catch his every word.
Grinning broadly, Alex Godoy described the house just outside the tinted window. “Every price is negotiable,” he reminded his audience. Then he uttered the magic phrase: “OK, everybody, off the bus!”
When the doors of the shuttle-style minibus flew open, people bounded out, swarming into a modest, 1,029-square-foot home in northwestern Pasadena that somebody had inhabited only months before. Never mind the cockamamie back room or paltry yard. At $358,000 – $106,000 below its previous sale price – deals like this 1926 clapboard with three bedrooms and a “peekaboo” view don’t come around often. Folks lingered, chatting about possible bids while the bus waited to transport them to the next offering.
Sweet opportunity to some, callous sales gimmick to others, the business of ferrying prospective home buyers to heavily discounted, recently foreclosed homes in plush, air-conditioned coaches is taking root throughout Southern California.
LTV Properties Inc., the Pasadena-based real estate company that runs Repo Home Tours in the Los Angeles area, showed that clapboard and six other bank-owned houses around the San Gabriel Valley on a recent Saturday thick with smog and heat. Averaging 1,300 square feet, with listing prices from $308,000 to $467,000, most of the residences shared a desolate quality at odds with the flamboyantly painted bus. Even so, the free weekend tours, now in their third month, usually fill up.
So there’d be no surprises, the company’s executives had scouted all of the listings ahead of time except for the third stop in Monrovia. The lender that owned the three-bedroom, 1,190-square-foot fixer-upper priced it to move at $350,000, but intruders had tagged the walls and trashed the rooms.
Godoy soaked up the vandalism for a minute and smiled thinly at the milling crowd.
“OK,” he announced, “everybody, back on the bus!”
Nobody dwelt on that bizarre scene or the dying landscapes or flaking exteriors of the other listings. The banks are so eager to unload repossessed houses that they’re discounting them at 40% to 60% below market value and selling them, generally speaking, in “as is” condition. The next house – a slightly nicer, better-secured place in Duarte selling for $329,000 – ignited excited talk among the riders. They were interested.
David Levario, a 37-year-old construction worker from Montebello, found the tour valuable. “I like what they’re offering,” he said of LTV’s listings. “I’m a hard-working man looking for a place for my family. I’m renting and tired of making other people money.”
Most of his fellow blue-collar passengers were about his age. Between stops, they scoured each house’s summary report. Inside the residences, they fingered appliance hookups, banged on walls, surveyed floor plans and tried to visualize how they’d fit in.
The unfortunate circumstances of the previous owners’ departures weren’t part of the conversation. Asked whether he felt sympathy for them, or wondered about the back stories, Robert Corral, 27, expressed the common view.
“A lot of people got [themselves] into the situation that got them foreclosed,” said the Azusa equipment operator. “You don’t want them losing their home, but it’s a chance for me to do something.”
LTV launched the tours after its owner saw a “60 Minutes” segment about Cesar Dias, a Stockton real estate broker and mortgage consultant who developed the tour-bus idea amid a sea of Central Valley foreclosures. It was a startling success, and Dias began franchising the Repo Home Tours for $20,000 a pop. Franchisees now are shuttling prospects through Santa Ana, San Diego, the Inland Empire, Las Vegas, even Texas and Florida. Competitors with similar names also have popped up.
It’s understandable. Luring two dozen prospects onto a bus for a three-hour tour is the equivalent of an infomercial before a captive audience, LTV Chief Executive Cesar Haro said. Tour operators are able to promote each home on the ride over, explain down payments, offer loans and foster enthusiasm out of an otherwise dreary landscape. Home shoppers don’t have to drive or pay high gas prices, and can focus on the pickings. To keep stomachs happy before the bus rolls, LTV serves passengers juice, Starbucks coffee and doughnuts.
“We’re getting a lot of first-time buyers who couldn’t afford a $600,000 house before,” Haro said. “We’re here to motivate them that there’s an opportunity. But it’s not like a used-car salesman pushing them to buy.”
The homes, owned by Washington Mutual, Wells Fargo, Countrywide and other nameplate lenders, typically have been for sale roughly three months. Most people making an offer on a house they saw on the tour use Haro’s real estate agents to represent them and EquiFinance, LTV’s mortgage unit. Like many real estate firms, LTV locates foreclosures through the Multiple Listing Service or private channels. In almost every case, the foreclosure occurred because the previous owner had an adjustable-rate mortgage with little or no equity, Haro said.
For buyers, it’s a golden chance in an imploding period. Last month, 38% of homes sold in Southern California were foreclosures, compared with 8% in March 2007, according to DataQuick Information Systems. Overall, home sales plunged to their lowest level in 20 years during the traditionally brisk, spring home-buying season. Median prices for a typical Southland home fell 20% from a year ago.
At 58, Peter Rodriguez was one of the older looky-loos on the tour. He said he was searching for a “middle market” investment out of reach before.
“If you’re looking to get rich quick, bet it all on red in Las Vegas,” said the water-district worker. “I’m looking for a property I can rent out and make a little money from.”
As Rodriguez spoke at a small Pasadena house LTV presented, several neighbors glared at the bus. LTV had it wrapped with a special glossy paint job depicting a smiling family next to a “SOLD” sign. Whether on freeways or inside neighborhoods, onlookers frequently glowered or did double-takes at the rolling sales pitch. At only one spot did neighbors seem heartened to have the troupe pull up.
Well aware that some communities have berated the bus concept as bargain shopping for somebody else’s misfortune, Haro and his colleagues have their arguments sharpened. If not on a tour, people would shop for foreclosed homes with their agents. And by helping fill vacant houses, he claimed, they’re reducing blight, crime and property devaluation. Besides, Haro said, he’s not running a party bus “serving margaritas.”
“We’re putting together a distressed property to a buyer, and that’s all,” he said.
Packed as the tours have become, they aren’t even on the radar screens of some industry experts, including the National Assn. of Realtors, which hadn’t heard about them until contacted by a reporter. USC real estate professor Raphael Bostic wasn’t aware of them either, though he wasn’t surprised. “In every downturn, there are lots of folks waiting to swoop in and take advantage of a situation,” Bostic said. “It’s part and parcel of a capitalistic society.”
Whether it’s right or wrong, it seems to be working. Two riders eventually bid on the vandalized Monrovia place.
Copyright Los Angeles Times