September 24, 2006
By Christine Dunn -
As seen in the Providence Journal - Sunday, September 24, 2006
The foreclosure auction was scheduled for 9 on a Thursday morning at the small, Cape-style house on a country road near Putnam Pike in Chepachet. The house appeared to be vacant. A for-sale sign was on the front lawn, surrounded by tall weeds.
The auctioneer and one potential bidder were standing on the back deck, chatting, on the cloudy morning.
Jeff Craig, of Commonwealth Auctions, in Newton, Mass., wearing a headset and holding a clipboard, was waiting for a call from Wells Fargo Bank, which held the mortgage that was in default.
Ken Robertson, of Glocester, was waiting to see whether he could pick up a bargain. Robertson buys houses, fixes them up, and sells them at a profit.
The two men had met a few times before, in similar circumstances. There has been "an enormous amount" of foreclosure auctions in Rhode Island in recent months, Robertson said.
By 9:15, it was all over, with no fanfare or theatrics. By phone, Wells Fargo offered $261,067.26 for the Narragansett Avenue property -- the amount of the outstanding mortgage, plus fees and penalties. Robertson wasn't interested in besting the offer. He said the house might be worth $250,000 in pristine condition.
Robertson said many defaulted mortgages issued in 2005 are higher than the market value of the property in question. Many people were mortgaged to the hilt in the past few years, and it didn't take much to push them "over the edge" into financial distress, he said. For many owners, it was increased energy costs, Robertson believes.
The foreclosure rate in Rhode Island for "subprime" mortgages -- loans made to people with less-than-perfect credit -- appears to have increased 150 percent since last year, more than any other state in the country, according to data supplied by LoanPerformance, a San Francisco firm that analyzes mortgage data. It is a subsidiary of First American Real Estate Solutions.
"We've been busy," said Sal Corio, owner of SJ Corio Company, a Warwick auctioneer. Corio doesn't specialize in real estate but is handling the auction of 19 condominiums at 19, 21 and 23 Cherry St. in Pawtucket on Sept. 30. The units, formerly apartments, were recently renovated in a conversion project. The minimum bid will be $87,500 per unit.
Joseph DeAngelis, a lawyer representing the condo owners, a group of investors, said the renovation was completed four or five months ago and the units went on the market for $99,900.
"It's surprising to everyone that they're not selling," he said.
Corio said foreclosures aren't the only reason a property ends up on the auction block. He said a woman recently called and asked him to auction her condo, which has been on the market for six months.
But Corio said many of the 100-percent-financed house loans of 2004 and 2005 are the "upside-down mortgages" of today, meaning the outstanding loan exceeds the market value.
"These mortgages written in 2004, 2005, 2006 -- they haven't even made a payment yet, or they made one or two payments. There's no equity," Corio said.
"In the late '80s, we were doing a lot of real estate. Foreclosures were quite plentiful -- which we're seeing again today."
The Mortgage Bankers Association recently reported that home-mortgage foreclosures in the spring, from April to June, rose to 0.43 percent, up from 0.41 percent in the first quarter of the year. The association's survey covers 42.5 million loans.
On Sept. 14, at 11 a.m., two hours after the Chepachet house was sold back to the mortgagee, another auction took place, this one at the Bay Voyage Inn in Jamestown. But this was no foreclosure auction.
A small crowd laughed and exchanged pleasantries over coffee and pastries in a comfortable meeting room with sweeping views of Jamestown Bay. About 50 people, including town officials and a member of the local land trust, were in attendance for the auction of a 15.46-acre parcel owned by retired Jamestown businessman Robert Munro Clarke. Of the group, 12 were registered bidders who had arrived with certified checks for $50,000.
Among that group, wearing a dark suit and carrying a large briefcase, was Michael A. Voccola, corporate vice president of the Procaccianti Group of Cranston -- the company that bought The Westin Providence last year for $95.5 million.
But despite the upbeat atmosphere and the upscale setting, these buyers were also looking for a bargain.
The 15.46-acre parcel was to be sold at "absolute auction," meaning there was no minimum price. The undeveloped land on Beavertail Road has water views and town approvals for a water hookup and a private septic system for a four-bedroom house, according to Robert Bailey, an agent with Island Realty in Jamestown.
Clarke had purchased the land, originally part of a larger parcel, in 1973; he had sold off other sections, including some waterfront property, over the years, Bailey said. Clarke had tried to sell this latest parcel on his own for several years before listing it with Bailey last year, for $1,350,000. Earlier this year, the asking price was reduced to $1.2 million, but there were still no takers.
Jerome Manning, a tall, broad-shouldered man with a booming voice and a hearty sense of humor, was the auctioneer. Manning is chief executive officer of JJ Manning Auctioneers of Yarmouth Port, Mass., on Cape Cod.
Before starting the bidding, Manning announced the ground rules, including a 10-percent "buyer's premium," which meant that the successful bidder would have to pay 10 percent above his or her winning bid.
Right away, it was clear there were only two serious bidders: Voccola, who was in constant cell-phone communication with another party, and a man whom Bailey recognized as a neighboring landowner. After Manning asked for opening bids of $2 million, $1.5 million and $1 million, bidding started at $500,000, increasing in increments of $50,000, then $25,000, then $10,000. The bidding ended at $920,000, and Voccola was the winner. With the 10-percent buyer's premium, the sales price was $1,012,000.
After completing the paperwork with JJ Manning president Justin Manning, Jerome Manning's son, Voccola quickly departed, declining to comment on the sale or what the plans might be for the property.
Jerome Manning said he was headed to Naples, Fla., again to sell real estate; this time, a large group of properties. Things are tough in Florida, he said, but "there are real estate issues everywhere."
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