A home page for bidding on foreclosures
Some firms see a place for an online market in distressed properties. Drawn by the convenience, faraway investors won't know what they're getting into.
As the nation prepares to pay the price for years of unfettered property speculation, a collection of online companies is hoping to cash in on an oncoming wave of foreclosure sales by auctioning distressed homes online -- with significant consequences for homeowners as well as purchasers.
Next month, Duval County in Florida will be the first in the country to hold an Internet foreclosure auction, forgoing the traditional courthouse sale in the hope of attracting buyers from other areas.
If the sales proceed and other states sign on, it will be an earth-shifting change in the way foreclosures are handled because it will eliminate a key requirement meant to protect homeowners from unscrupulous lenders.
By law in California -- and every other state save Florida -- lenders may not simply claim that a homeowner has defaulted on payments and move to take over the house. Instead, they must hold a public sale, in the county where the property is located, after notice has been provided to the borrower and the sale has been advertised.
Internet sales will also have important ramifications for bidders.
Because potential buyers may be out of the area, many won't be able to fully research the properties and might wind up, as happens even in courthouse sales, finding faucets with no running water, foundations that are crumbling and even the occasional corpse.
Moreover, housing experts worry that online bidders looking for a quick profit are precisely the kind of speculators that the troubled market doesn't need.
"When you make it easier and easier for people to gamble, you are going to have a tremendous number of people who think they have the smarts to do this and they are going to get nailed," said Ward Hanigan, the owner of Innovest Resource Management in San Diego, who buys foreclosed homes and trains bidders.
RealAuction, the company handling the Duval County sales, and its competitors hope to take the Internet model nationwide, including states like California with a large inventory of foreclosed homes. Right now, most of the properties sold online across the country already have been through public auctions and, unable to find buyers, have been taken over by their lenders.
"I would have to be fundamentally persuaded that it wouldn't compound existing problems in the housing market," said state Sen. Mark Ridley-Thomas (D-Los Angeles), chairman of the Business and Professions Committee and author of new legislation to help people refinance subprime loans.
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