Foreclosed homes flood auction

Auctioneer Hudson & Marshall sold nearly 240 foreclosed homes in the Washington area last weekend, making a small dent in a large backlog of homes abandoned by buyers who couldn’t keep up with escalating payments.

When the auction ended Sunday in a Tysons Corner hotel ballroom, the auctioneers had sold homes worth more than $46 million.

It was the biggest Washington-area auction that Hudson & Marshall has handled in its 11-year history.

More than 1,000 potential buyers or agents showed up to bid for properties at the Tysons Corner auction. Bidding on previous days in other hotels throughout the Washington area attracted hundreds of others.

More auctions are planned as local homeowners continue to get squeezed by the credit crunch.

“It indicates borrowers in the greater D.C. area may have succumbed to subprime adjustable-rate mortgages to afford pricey homes … that would otherwise be unaffordable to them,” said Dave Webb, a principal of Dallas-based Hudson & Marshall.

Monthly payments on adjustable-rate mortgages fluctuate with interest rates. Fixed-rate mortgage payments stay the same until a loan is repaid.

As interest rates have risen over the past two years, homeowners with adjustable-rate mortgages increasingly are facing foreclosure when their rates are reset.

“With the rise in foreclosed properties, more and more lenders are using auctions to move large volumes of property in a short period of time,” Mr. Webb said.

Foreclosures nationwide were up 115 percent at the end of August from the year before, according to RealtyTrac, an online marketplace for foreclosed real estate.

Nationally, one out of every 510 households faced foreclosure in August, compared with one out of 1,010 households in the District, one out of 688 in Maryland and one out of 832 in Virginia.

List prices for homes Hudson & Marshall auctioned in the Washington area last week ranged from $30,000 to $1.1 million. Many sold for 20 percent below market value. About 75 of the properties offered at auction failed to sell.

One home listed for sale at $1.1 million in an upscale Vienna, Va., neighborhood sold for $855,750 at auction last weekend.

The auctioneers said the high number of foreclosures is unusual in an urban area known for its strong economy and job security.

“[Washington] is much more stable than other markets in the country because of government-based industry and other strong industry,” Mr. Webb said.

“We’re selling foreclosures like hot cakes,” said Century 21 real estate agent Greg Josephs, who represented sellers at the Tysons Corner auction.

One of his client’s properties in Centreville was listed at $279,000 but sold for $215,000, which Mr. Josephs called “a great buy.”

“All of our properties sold at an average price of 72 percent of their listed value,” he said.

He advised anyone unfamiliar with the real estate market not to try to buy a house through auction without help.

“It’s such a large transaction, if you don’t avail yourself of good counsel, you’re asking for trouble,” Mr. Josephs said.

Sellers typically are trying to cut their losses after buying a home they could not afford rather than searching for a long-term business relationship with buyers.

“There shouldn’t be any mistaken ideas that they’re your pals, they’re your friends,” Mr. Josephs said. “They’re not.”

Many buyers at last weekend’s auction were looking for investment opportunities.

David Tighe, a Reston real estate agent, was representing an old high school friend who purchased two houses. The pair plan to start a business renovating homes, then sell them for a profit or rent them.

The buyer paid $157,000 for one house and $294,000 for the other, both of them in Sterling Park, Va. Mr. Tighe described them as having worn carpet or drywall that needed to be replaced.

After Mr. Tighe completed the $294,000 deal, he said, “We had a Realtor with a buyer who offered us $330,000 on the spot.”

Other bidders said the best deals were gone by the time the auction started.

The auctioneers allowed buyers to place bids on their Web site and close the deal if the banks that foreclosed on the properties agreed to the price.

Tina Beauchain, who was considering buying a home along with her husband, found several houses that interested her on the Web site.

“They presold,” Mrs. Beauchain said. “They didn’t make it to the auction.”

The Beauchains run a home-remodeling business in Sterling. They considered buying a house at auction as an investment property.

“The ones that didn’t look so hot, we thought they were really overpriced,” Mrs. Beauchain said. “From an investor perspective, there weren’t that many good deals.”