Clips / About


Meir Rinde


Despite risky market, deals await


By Meir Rinde

Staff Writer

April 19, 2009


TRENTON — Every Wednesday at 2 p.m., eight or ten people shuffle into a sheriff’s sale in Mercer County’s civil courthouse and listen to a rapid-fire auction of several foreclosed homes.

For the most part the would-be bidders sit silently on the room’s pewlike benches, listening to bank representatives recite lists of overdue taxes and liens.

No one bids, and the banks trying to sell the homes have to buy them back for $100.

But at one sale earlier this month, an actual contest broke out over a condomium on Washington Court in East Windsor. Despite the sour economy, rising unemployment and the real estate crash, one man in a suit and another in a sweatshirt had both decided they wanted the home.

They took up the bidding at the bank’s starting price of $140,000 and went back and forth, $1,000 at a time, until the man in the sweatshirt bid $178,500 and his competitor stayed silent.

The house had previously sold for $148,500 in 2001, but the average price for a similar home is now $207,000, according to the real estate website, suggesting the winning bidder could flip it and earn at least $15,000.

The bidder, who declined to give his name, said afterward that for the past three years he’s been buying distressed homes, cleaning them up and selling them, never mind the recession.

Thanks to the misfortunes of people who overborrowed, overpaid or lost their jobs, he was finding homes being sold for less than their near-term resale value.

“I think they’ve hit the bottom,” he said. “I think it’s a good time to buy.”

Recent data suggest that not many people agree with him, or if they do, they are unable to follow through. In the first quarter of 2009 there were 473 home sales in Mercer County, a 21 percent drop from the same period in 2008, according to Prudential Fox & Roach Realtors.

But the data also show that the few who are bold enough or have sufficient equity to invest are finding good deals.

Countywide the median home sale price was $275,000 last year, down 2.5 percent from 2007. In the first quarter of 2009, several of the county’s municipalities saw median sale prices that were more than 10 percent lower than a year earlier.

In Hopewell and Princeton townships prices were down 20 percent or more, and in Trenton they fell 40 percent. Only Robbinsville and Pennington Borough showed increases.

The low prices, combined with a stabilizing mortgage market and a beefed-up federal tax credit for first-time homebuyers, are beginning to spur an increase in buying, according to Desiree Daniels, team leader at Re/Max Tri County in Hamilton.

In addition to normal sales, Daniels often handles short sales, in which a bank agrees to sell a distressed owner’s home for less than the value of the mortgage rather than go through the drawn-out hassle and expense of a foreclosure.

Those homes, like others on the market, can move in a weekend if they’re priced right, she said.

“It’s becoming more and more commonplace right now,” she said. “I’m getting multiple offers even on the straight-out normal properties. It’s an overall good sign of things to come.”

Daniels said her office is handling at least three properties currently that were priced at unrealistically “aggressive” prices and sat on the market for months until the owners and the bank came to understand they would have to accept less.

For example, in Bordentown City she has a house that sold for $225,000 in 2005, she said. The owners, who could not afford their mortgage, and the bank recently agreed to list it at $164,900 and she quickly received several offers, she said.

The buyers of such cut-rate properties are people like Joe Franc and Tina Kalinowski, a newly engaged couple who rent in Lawrence and are buying their first home in Hamilton, Daniels said.

Franc, a financial advisor, and Kalinowski, a social worker, have been looking at homes for a year but were hesitant about getting into the market.

They looked at some short sale properties but finally settled on a traditionally owner-sold, four-bedroom home on Elmore Avenue, which they’re buying for $226,000.

“We didn’t single out any type of home,” said Franc, 32. “We just looked in a price range we were comfortable with.”

A low price, good interest rates and the new $8,000 tax credit for first-time homebuyers meant the couple could get the house they wanted at a price well below the maximum they could afford, he said.

That was a concern given the economic recession and widespread layoffs in almost every industry, Franc said.

“If something went wrong, we wouldn’t be maxed out on our house payment,” he said. “Right now, with the rates so low, it seemed like a great time to go and do it.”

Daniels said it’s people like Franc and Kalinowski, who are looking for a competitively priced home to live in, who are diving into the market rather than speculators trying to profit quickly.

“It’s not a market to flip a house,” she said. “It’s too risky. There’s too much instability.”

She does still see some “foolish investors,” she said, as well as smarter ones willing to wait a while to see their profits.

“It’s more, you buy one, you put in a tenant for five to seven years, and then you sell. They’re long-term investors,” she said.

But back at the Mercer County courthouse, hope springs eternal.

Last Wednesday’s sheriff’s sale again drew a handful of would-be buyers, as well as two real estate agents who attend regularly in the hope of picking up clients.

No one made any bids, but afterward the group milled around in the corridor outside the courtroom, discussing strategies for evaluating which foreclosed homes are worth the risk of purchasing without the benefit of a thorough inspection first.

“We’re just getting our feet wet,” said Tom Bongiorni, an East Windsor contractor who was attending with an accountant friend. “I’m a contractor, so I’ve always been interested in real estate.”

Bongiorni said he was trying to learn how to take advantage of short sales, and was aware that he might not be able to flip a purchase immediately.

“You might buy something and then have to hold onto it for a long time,” he said. “So if you don’t have some money, it’s probably not a good idea.”

Fayez Azeez, a financial analyst in Pennington, said he thought investing in residential real estate was such a great idea in the current market that it would be foolish not to jump in.

“The last time this happened was the late 1980s,” he said. “We’re not going to see this again for some time.”

After Azeez recently lost his job his wife suggested he use his time profitably by looking for homes to buy, he said. He was on his way to the old county courthouse to look up liens on a horse farm in Pennington they were thinking of buying.

“I can generate the money from the property to service the debt, so I can own the property scot-free,” he said.

Azeez said he had yet to buy anything, but he had a business partner who was buying and selling properties left and right, and he was eager to cash in as well.

“The margins are huge right now,” he said, “because the inventory is out there right now.”


Copyright © The Times of Trenton 2009