Transcripts

"Reviving the Economy: Real Estate"-Auction Block Bargains

SUSIE GHARIB: There are more than two million houses in foreclosure now. Presuming the nation finds its way out of the housing mess, how will all those homes find buyers? One way is through foreclosure auctions. As we continue our series, "Reviving the Economy: Real Estate," Jeff Yastine looks at who's buying at auction and why.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is what the foreclosure crisis has come to. Dozens of properties, some expensive, some exceedingly cheap and all going under the hammer. Houses, town homes and condos passing from the lenders who hold the defaulted mortgage to buyers who can finance the deal. People like Lilly Lappost, who brought along her realtor as an advisor.

LILLY LAPPOST, FORECLOSURE AUCTION BIDDER: I just recently got divorced, so this is going to be my purchase for my primary home. So this sounds like a good deal and we'll see what's the best.

YASTINE: Zetabid is a large, national organizer of foreclosure auctions. This is the company's second visit to Miami in the past nine months. Chairman Bob Bellack says auctions are becoming more popular with banks that hold foreclosed properties.

BOB BELLACK, CHAIRMAN, ZETABID: They can back out , let's say they have 50 or 100 of these houses, you can knock it all out in 30 days. They give us the houses, 30 days later, they're selling at auction.

YASTIINE: If you're a bidder, you have to do your homework before the auction. We caught up with Rachel Gonzalez, a first time homebuyer hoping for a bargain as she toured this Miami town home with realtor Jorge Maderos.

RACHEL GONZALEZ, FORECLOSURE AUCTION BIDDER: The Internet is a wonderful thing, OK? Thank God for that. We didn't have it 20 years ago. So you go online, you look, you check out the neighborhood, the things the prices are going for around here. Talk to my realtor.

JORGE MADEROS, REALTOR, YIALOURIS GROUP REALTY: You have homeowners, you have investors. It's all types of people. I mean, they're just looking right now for a deal.

YASTINE: Auctions like this one are a way of discovering the true price that the market is willing to pay, but the banks also have what's called a reserve price known only to them. And if the bidding here doesn't meet or exceed that reserve price, then the property stays on the foreclosure list and on the bank's books. Perhaps 15 percent of the properties at auctions like these don't meet a bank's reserve price. As it turns out, Rachel was outbid for the town home, but she's not out of the game. Her realtor says she's still looking for the perfect place, as long as the home economics are right. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami Beach.