'Divine providence'
Buyers finding great deals on foreclosures

LAWRENCEVILLE - Olivia Mickalonis is enjoying fixing up her newly purchased home. She's had new carpet installed throughout, painted every room and replaced the old countertops with sparkling granite.

After handing over cash required to purchase a home, many buyers have little left for immediate decorative upgrades. Mickalonis has the luxury of sprucing up her new house because she saved $99,000 on the home's appraised price by buying a foreclosure, she said.

The number of foreclosed homes in Gwinnett County set a new record high this month with 1,180 homes being repossessed by lenders. The previous high was set in January at 1,108. Those numbers are compiled from information sent for publication in the Gwinnett Daily Post from various foreclosure attorneys in the area.

The April figure is nearly double that of a year ago. April 2007 saw 595 homes foreclosed.

The Post's records go back to 2002. In June 2002, the county saw 228 foreclosures, its lowest number recorded by the Post.

Foreclosures present opportunity for investors

While the loss of a home is catastrophic for the owner, those foreclosures are fueling the local housing market, said Lin Stadler-Perry, real estate agent for Century 21 All Atlanta, and are contributing to the rental market, Frank Norton Jr., president of the Norton Agency in Gainesville said in an earlier interview.

Those foreclosures represent only about 5 percent of the real estate market, said Stadler-Perry. With Gwinnett's market glutted with new construction and plenty of resale homes, many buyers find the lower-priced foreclosures too good to pass up.

"I count it as divine providence," Mickalonis said of her Centerville home, for which she paid $201,000. "It was in very good condition. Some people take out heat pumps and sinks from a foreclosed home. We put in $16,000 worth of upgrades and we are still far below what homes in the subdivision are selling for. Most are selling for $350,000."

While some people lose their American dream, others, such as contractors and real estate investors, are inadvertently reaping benefits.

Ron Puckett, an Auburn carpenter, is seeing an increase in his remodeling business.

"I'm getting about double the calls from people since the first of the year to fix up their homes," he said. "They decided not to spend money to buy a new home. They figure it's cheaper and better to fix up the one they're in."

Lisa Bennett of Dacula is making a career of investing in foreclosed homes. The former mortgage professional acquired her real estate license in February and is in the process of buying her first foreclosure as an agent, known as a short sale, for half its appraised value. She will turn around and sell for a profit.

"I got the bank down from $143,500 to $79,900," Bennett said. "The house was owned by an elderly couple. The wife had worked at the same job for 27 years, they kept impeccable credit, but she got sick and they couldn't keep up the payments on this home and the one they were building. I considered it a privilege to be able to help them out."

What caused the onslaught of foreclosures?

Anthony Mitchell, director of the home ownership center at The Impact Group, a Duluth-based foreclosure counseling service, places the blame for the high number of foreclosures on adjustable rate mortgages, interest only loans and lenient lending practices popular in the past eight years. Buyers purchased homes at lower interest rates believing those homes would sell for huge profits before the interest rates adjusted higher. As market prices corrected themselves across the nation, the home sale market slowed, ARMs adjusted upward and some buyers were left with mortgage payments they couldn't afford, leading to foreclosure, Mitchell said.

"People were able to get themselves into a house they could not afford by doing these ARMs," said Jackie Koman, foreclosures manager for McCalla Raymer Default Services, a Roswell-based foreclosures service used by law firms that represent the lender.

How foreclosure works

After four months of non-payment, the lender refers the property to a service like that offered by McCalla Raymer. They publish the proposed foreclosure in the local newspaper's legals section for four consecutive weeks. If the owner is unable to save the home by filing bankruptcy, working out an agreement with the lender or catching up the payments, the home is sold on the courthouse steps the first Tuesday of the month. If no one buys the home, it reverts back to the lender or investor and is marketed for resale as a foreclosure property, known as REO, Koman said.

That means that some of Gwinnett's 1,180 foreclosed homes might be salvaged this month, if their owners work out a payment plan with the lender.

Foreclosures slow related business

Although some home buyers find elite deals on foreclosed homes, others feel the pinch of an up and down market. David Lawler, closing attorney in Dacula, has had to branch out into other areas of legal practice, such as wills, to accommodate for the shortfall.

"We actually had a very good February but it started going south again in March," Lawler said. "You are always going to have foreclosures due to sickness or disability, anytime. Although the numbers are rising and falling, we are seeing a steady cyclical decline in (home sale closures) over the past two years. It's not the end of the real estate world as we know it. I closed on a house this week that was appraised at $600,000. The buyers got it for $440,000."

The steady stream of foreclosures might run dry

While some struggle through the financial and emotional pain of losing a home, Gwinnett County might be glimpsing daylight, Lawler said.

"We are clawing our way out of the pit," he said. "Are we at the edge of the pit? No, but we are coming up out of it."

Potential home buyers and investors who want to take advantage of the remnants of the foreclosure market should get their ducks in a row first, Mitchell said.

"Mortgage rates are coming down," he said. "For people taking the time to get prepared, it's a good time to look at buying. The Atlanta area hasn't been hit quite so hard as other areas because the economy here is more diverse and people are still moving in. Save your money and educate yourself about home buying."

The opportunities are even better for a buyer skilled in home maintenance.

"If somebody's handy, they could make out like bandits," Mickalonis said.