As the sub-prime mortgage mess continues taking its toll on home buyers and financial institutions, thousands of distressed properties are hitting the market at bargain-basement prices. Savvy buyers can pick them up cheap and resell them for a tidy profit.
At least that's the pitch appearing with increasing frequency on Craigslist and elsewhere.
The reality is that such offers may be little more than an inducement to spend hundreds of dollars for property listings of dubious value, or ones that most people could obtain free from banks and public records.
San Jose resident Roz DeKett, 47, answered an ad on Craigslist for a soon-to-be-foreclosed-upon house in the Bay Area. She ended up speaking with a sales rep for a Los Angeles company called Home Access USA, which specializes in distressed properties.
DeKett said she was told that information about the home she was interested in and other properties would cost her $198. The money, she was told, would be refunded if DeKett decided within 24 hours that she wasn't satisfied.
After receiving the listings, DeKett discovered that it was up to her to contact individual property owners and inquire whether a particular house might be for sale. If so, she'd then have to negotiate a sale that would include taking over the seller's outstanding mortgage.
DeKett called Home Access back and asked for a refund. She said the sales rep replied that because she'd already accessed the online listings, no refund would be possible.
"The whole thing looked too good to be true," DeKett said. "Guess what?"
Home Access' president, Mike Davenport, told me his company wasn't doing anything wrong, and was in fact a victim of its own success. More from him in a moment.
Irvine-based RealtyTrac, one of the more reputable foreclosure-listing services on the market, reported last week that foreclosures were up in most metro areas, with California, Ohio and Florida accounting for the majority of cities hardest hit by the problem.
A wide variety of smaller services -- try Googling "foreclosure listings" -- has emerged in recent years to connect distressed properties with potential buyers. Almost all involve fees that can run hundreds of dollars.
"Every time there's a downturn in the market, you see these types of entities appear," said Tom Pool, a spokesman for the California Department of Real Estate. "Some are definitely scams."
Typically, he said, the services obtain free lists of distressed properties from county officials or banks and then sell those lists as exclusive leads.
"Lenders are required to file a notice of default with the county recorder's office when someone misses their mortgage payments," Pool said. "These services comb the public databases for these notices. That's where they get their catalog of properties."
Is this illegal? Not if all a company is doing is compiling lists of potential properties for sale, Pool said. It may not be particularly ethical to sell people something they can obtain on their own free. But it's not illegal.
The Better Business Bureau gives Home Access USA its lowest rating of "F" and advises consumers not to send money to the company. Most complaints about Home Access involve people not receiving advertised services or not receiving refunds, the bureau says.
I tried for several days to reach Home Access' Davenport by leaving messages at various numbers. He never called back.
In the meantime, I learned that Davenport also runs another L.A. company called XLR Publications, which sells guides that purport to teach people how to buy homes in the foreclosure market or improve their credit score. Each of the company's guides sells for $198.
The websites for Home Access USA and XLR Publications show that both companies operate out of the same L.A. office, at 11901 Santa Monica Blvd., Suite 603.
I visited the address. There's no office for either Home Access USA or XLR Publications. Rather, there's a strip mall containing a Mail Boxes & More store, where a worker confirmed that "Suite 603" was mailbox 603, which is rented for $35 a month by Home Access and XLR.
The California secretary of state's office has no listing for Home Access USA. But it does have a business listing for XLR Publications, which says the company is in fact located at 11833 Mississippi Ave., Suite 200.
But when I visited the metal-clad building at the site, I found Suite 200 to be occupied by a company called Lotus Interworks, an outsourcing firm.
Bhaskarpillai Gopinath, Lotus' chief executive, said his company handled customer service for both Home Access and XLR. He said he's had quite a bit of trouble with the firms -- particularly Home Access.
"They were not paying their bills for a few months," Gopinath said, "so we had to shut them down. We allowed them to start working again after we made a deal for 50% of their profit."
To date, he said, there hasn't been any profit.
"They're not making any money," Gopinath said. "We're thinking about shutting them down again."