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Published: Saturday, 10/9/2010

Lucas County holds sorry title in forclosures

BY JON CHAVEZ
BLADE BUSINESS WRITER

A house in the 2900 block of Parkwood Avenue in Toledo's Old West End that sold three years ago for $67,000 went through foreclosure this summer and sold for $9,500.

Similar circumstances are evident throughout Lucas County, which grabbed an undesirable distinction of having the lowest average selling price — $54,125 — of foreclosed homes this summer of any of the counties that are home to Ohio's major counties.

The same April-through-June figures showed Lucas had the second-highest percentage among the eight major Ohio counties in reduction of selling prices for foreclosed homes versus nonforeclosed homes — at 53 percent. Cuyahoga County, home of Cleveland, was at 59 percent.

The figures, from a study by California real-estate data firm RealtyTrac Inc., shows much of northwest Ohio was hit hard by foreclosures in the second quarter of the year.

The study found that for foreclosed homes, Ohio had the biggest price reduction of any state and Michigan had the lowest average price.

“The foreclosure problem, it's all the way through the market. You can go into Sylvania and find foreclosed homes,” said Kenneth Crabtree, a real estate agent with DiSalle Real Estate Co. in Oregon.

“But the problems are worse in some areas. You go to East Toledo and you can buy properties for $10,000 all day long. Seven years ago, you'd have been hard pressed to find one for under $20,000.

“You go to the north end [of Toledo], and they're giving them away there.”

Mr. Crabtree said Lucas County's prices for foreclosed homes are the lowest in the state's eight large metro areas because the county's nonforeclosed housing values also have been among the lowest.

“Our prices weren't as strong as Cleveland's,” he said.

Mike Badik at the Toledo Department of Neighborhoods, agreed: “Our home costs initially were very low and now the foreclosure market is equally low.”

A second-quarter report from the National Association of Realtors shows the Toledo area's median selling price for all homes was $90,900, compared with $118,200 in Cleveland, $149,700 in Columbus, $131,100 in Cincinnati, $112,400 in Dayton, $119,700 in Akron, and $111,500 in Canton. Only Youngstown had a lower median price, at $75,100.

Real estate experts said Lucas County's average foreclosure selling price is being dragged down because large clusters of foreclosed homes are in older or poorer neighborhoods where housing values are not high and foreclosure selling prices are a pittance of the home's value.

Those values have been crushed even more, experts said, because many of the foreclosed houses have been vandalized and gutted.

Such conditions also exist in the counties where Cleveland, Dayton, and Youngstown are, experts said, and their foreclosed-home selling prices are not much higher than the average in the Toledo area.

The Ohio average selling price of foreclosed homes is $81,205, and Michigan's is $71,794.

The U.S. average is $174,198, which is much higher in part because in many states foreclosures occur with newer, pricier houses, said Daren Blomquist, a researcher at RealtyTrac.

But the low price in Lucas County — which exceeded the average price in only four smaller northwest Ohio counties — stems from its large stock of older housing that tends to drive down values, Mr. Blomquist said.

Experts said those prices attract investors who can buy a house with little money, fix it up, and then rent it or try to resell it at a profit.

Jon Modene, a broker at Re/Max Masters in Perrysburg who has been retained by several lenders to dispose of foreclosed properties throughout the Toledo area, said many investors buying foreclosed homes are from foreign countries.

“Our asset values are among the lowest in the country. Flint, Mich., and Detroit are the only ones that are lower,” he said.

The investors are sophisticated buyers who buy low carefully and turn foreclosed homes into rental properties, he explained.

Eager sellers

Government-backed mortgage holders such as Freddie Mac and Fannie Mae, as well as out of town banks eager to get foreclosed properties off their books, have been pilloried on pricing, Mr. Crabtree said.

“The investors come in and they just force the price down,” he said. “You list the price at $20,000 and they offer you $5,000. If several people offer you $5,000, you figure it's worth $5,000.”

The alternative is to hold out for a higher price, but experts said that invites other problems — the vacant house can be vandalized.

“It's a reality, unfortunately,” said Chris Hall, a vice president at the Danberry Co. and manager of its Oregon and Perrysburg offices.

“Say you have a property worth $40,000 or $50,000 in West Toledo and someone comes in and cuts out all the plumbing. What happens?” he said. “The banks won't put in any money to fix it, so it can't pass inspection for several loan programs. What's happened is you've made that property available only to cash buyers.”

Officials at Genoa Bank faced a dilemma recently with a foreclosed house in eastern Lucas County's Jerusalem Township.

The value of the house, which previously was appraised at $250,000, had dropped by two-thirds.

“It was vandalized by the people who were living there. They just destroyed it before they left,” Martin Sutter, Genoa Bank president, said.

Bank officials could have dumped the property and gotten “about $80,000 or $90,000” for it, Mr. Sutter said.

But instead, the bank spent $70,000 fixing the house, which will be priced at $230,000.

Rick Simon, a spokesman for Bank of America, said that when his firm reacquires a property through foreclosure, it assigns a contractor to preserve the property and someone to manage it.

But, said Mr. Modene, who handles foreclosed properties for Bank of America, depending on the neighborhood, the house could be at risk of being damaged.

A neighborhood with numerous foreclosed properties also is affected: The value of houses not in foreclosure declines.

“If you have four houses for sale on a street in a neighborhood and three are foreclosed, what are the buyers going to do? They're going to buy the cheaper houses and fix them up,” said Mary Ann Coleman, a real estate agent with Welles Bowen and president of the Toledo Board of Realtors.

Not every lender is victimized by vandals or pushed to discount prices heavily on foreclosed homes.

Directions Federal Credit Union, which has had about 15 foreclosures this year, has a team that monitors its small number of foreclosed properties.

“We're not going to put a ton of money into fixing up a property, but we put some into it,” said Ron Patton, senior vice president of lending for Directions.

“I think you see more and more of a problem with the nonlocal banks. They have nobody to really keep an eye on all their properties.”

Mr. Sutter, of Genoa Bank, said recent government rules allowing homeowners to stay in foreclosed properties longer have contributed to the decrease in the average selling price.

“In the past, when we foreclosed on a property we used to get immediate access to the property and move the people out, secure the property, and take care of it,” he explained.

But now the borrower has 30 to 90 days to remain in the home after foreclosure.

“They may destroy the house in that period.

“That's a real issue,” he said.

Contact Jon Chavez at:

jchavez@theblade.com

or 419-724-6128.



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