Foreclosure bus maps the local real estate bust
Local real-estate agents make shopping for a foreclosed home easier with tour bus service.
Special to The Seattle Times
With rising foreclosure inventory and buyer demand to see it, an enterprising local duo has taken a page from the California and Florida real-estate agent playbook and launched a "foreclosure bus" tour business, which they've dubbed "Property Dog."
Since June, Skyline Properties agent Todd Shirley and Ballard Partners agent Victor Hernandez have led investors, contractors and intrepid buyers on twice-monthly romps through Seattle-area homes with investment potential.
Along the way, the duo share wisdom and handouts about each property and dispense detailed lists of other foreclosures in the area. Bottled water and the occasional doughnut are included on the free tour.
Shirley has long helped investors and bargain hunters scope out foreclosures, frequently taking groups of three and four along on viewings. But in recent months, "demand has gotten to the point that it made sense to take the bus," Shirley says.
Foreclosure activity has risen 37.8 percent between the third quarter of 2008 and third quarter of 2009 in the Seattle-Tacoma-Bellevue area, according to data released last week by RealtyTrac, an Irvine, Calif.-based distressed-property research company.
Hernandez brings contracting experience along with real-estate insights, and can share wisdom about most of the properties' potential for eco-friendly or regular remodeling.
On a recent mid-October tour, a dozen bargain hunters pile aboard the Property Dog mini-tour bus to visit homes between Capitol Hill and Shoreline, plus a commercial site in Lake City.
The homes couldn't be more different.
This day's tour runs the gamut from a 1906 gutted Capitol Hill craftsman to a 3-year-old spotless houseboat to a post-World War II cottage in Maple Leaf and a 1980 split-level home in Shoreline.
Visiting foreclosures is nothing like a gentle weekend tour of open houses, staged to charm with soft lighting, strategically arranged furnishings and carefully placed art objects.
Most of these homes are cold, empty and dirty. Many have been winterized, meaning the utilities have been shut off and water pipes emptied to prevent freezing.
Shirley and Hernandez lead the way into dark basements or boarded-up homes with flashlights and cautionary warnings.
"Keep in mind that these homes have typically been empty for a minimum of 180 days due to the length of the foreclosure process," Shirley reminds the group as the bus chugs up an Eastlake hill.
But despite their lack of merchandising or curb appeal, each home piques interest among different buyers on board. And all the properties share a few common denominators: bank ownership and a low asking price.
Shirley estimates that less than 2 percent of homes on the market in the Puget Sound area fall into this category, but the variety of homes that appear here is continually broadening, with properties available in every neighborhood and price category.
The tour kicks off with a visit to Eastlake, where a 5,390-square-foot home previously appraised at $1.5 million hit the market earlier in October for $965,000. The five-bedroom, four-bathroom home has Lake Union views, a four-car garage and a basement in-law apartment.
One contractor remarks it mainly needs aesthetic repairs, like new floors, caulking, a paint job.
"This is a great house," says Shawn O'Gara, a contractor and investor who has bought, renovated and sold seven investment houses. "I bet it'll go for about $850,000."
O'Gara says he's at least six months from making another purchase but was on the tour to take the pulse on the market.
Next up: a major fixer-upper. The Craftsman-style house on Capitol Hill bore all the hallmarks of a remodel, or maybe a tear-down, gone wild. The 3,400-square-foot home — mortgaged for over $900,000, according to records provided by Shirley — is for sale at $479,950.
For that price the buyer would get a home with tarps for a roof, creaky wooden floors, occasional standing water, no electricity, walls stripped down to the studs and boarded-up windows.
"This needs a hotshot builder to finish it off," Hernandez says, as the troop squeezed inside a chain-link fence to get to the front door.
"It's probably a tear-down," remarks James Watanabe, a contractor specializing in framing.
After venturing to the attic, however, and checking the integrity of its woodwork, Watanabe changes his mind: "Actually, it's not a tear-down. The upstairs doesn't look too bad."
"This house?" O'Gara says. "It's over my head."
Patty Bertram, a local real-estate investor came curious to see the next property, a 390-square-foot houseboat. Rather than an investment, she says she is considering it as a potential primary home.
In Montlake, on the end of the pier nearest to the community's parking lot, the houseboat is priced at $335,000 — and features concrete floors, a modern stainless steel kitchen with a Wolf range, and a modern bathroom featuring a shower with no walls.
"This doesn't have good chi," she says, noting its partially landlocked position.
The tour progresses, onward to the Lake City commercial property first listed at over $1 million but dropped to $929,000; it is zoned for a variety of uses, including multifamily.
Located next door to a planned 196-unit housing project, Hernandez and Shirley lay out a financial scenario in which a proactive investor could buy in, rent the 10,000-square-foot property out at $1 per square foot, and bide their time until converting the building to a major apartment building.
In the corner of the parking lot, one rider pecks at his cellphone, calling to run some numbers.
On the bus afterward, another investor remarked that the whole building would make a great storage facility, especially given the future arrival of the neighboring apartment building.
He calls local storage companies and asks their rental prices, doing math in his head. As the bus crosses into Shoreline, Shirley tells the crowd that the next house was a "classic foreclosure," abandoned with plenty of garbage left behind, closet doors removed, the yard overgrown.
Beyond the aesthetics, Hernandez notes, the home had tremendous potential for a conversion to solar power, in part because of its hilltop location and the home's orientation on its lot.
But upon unlocking the house, Shirley and the gang learn a bank had sent a cleanup crew within the past two days.
With the home's trash gone and furniture relegated to the garage, the group could imagine a scenario in which replacing stained carpet, buffing up or pulling Pergo floors, dusting off the pine needle-dusted deck, and making other upgrades, could give the 1,800-square foot home potential as a resale or rental.
Priced at $259,000 — some $36,000 less than appraised value — it has sat on the market two months.
The strangest hitch, one tourist notes, while reviewing handouts is the bank wanted buyers to pay a $75 "document review" fee at closing — in other words, a fee for making an offer.
A few days after the tour, one of Shirley's first-time buyer clients makes an offer — for slightly below asking, Shirley says. With foreclosures assuming a growing role here, that's what Shirley wants to see.
"By the time the property's reverted back to the lender, it's making a new beginning," he says.