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MY TAKE- Oregon Home Foreclosures Showing Signs of Leveling Off
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MY TAKE
Oregon Home Foreclosures Showing Signs of Leveling Off
By John Helmick
In Oregon, as in the rest of the country, home foreclosures have been big news in recent months. But long before the housing crisis caused a storm of media interest on the subject, our company, Gorilla Capital, was keeping a close eye on the home foreclosure industry. We began buying homes at foreclosure auctions in 2005 at the height of the housing boom. We watched as home sales surged and prices inflated, then saw values plummet and foreclosures skyrocket.
After witnessing some staggering numbers – such as triple digit foreclosure increases in places such as Lane and Deschutes County – there now appears to be a general leveling off trend occurring in most Oregon counties. And in several of the 15 Oregon counties where we do business, notices of default – the official beginning of the foreclosure process – are beginning to decrease.
Through good times and bad, our company has continued to closely monitor home foreclosures in Oregon, tracking every notice of default and attending every auction in the counties where we do business. We compile an extensive database, carefully examine thousands of homes and crunch the numbers to get a sense of the overall picture. It’s a strategy that has been successful for us, as evidenced by the fact that we grew by 20 percent last year and expect to grow by 50 percent this year. And, we recently expanded to Arizona and plan to continue to expand throughout the western U.S.
As we’ve grown, we’ve become one of the leading voices in the foreclosure industry in Oregon. Unlike real estate agents or mortgage bankers, our industry currently has no trade groups, lobbyists or official member organizations, so it’s up to us to make sure all perspectives are heard when the public conversation turns to home foreclosures. But more on that later.
The crux of our business model is buying quality homes at affordable prices. We’re able to accomplish this goal by doing extensive value assessment, property inspection, title research, and by having cash to bid and purchase at foreclosure auction. For every home we buy, we look at over a hundred additional properties that don’t make the cut. Gorilla does one thing, but we do it very well. We find quality homes at great prices that are available for purchase at foreclosure auction. We only buy homes at foreclosure auction, we do not attempt to buy homes from distressed home owners prior to the foreclosure auction nor do we buy homes that have been foreclosed on and taken back by the bank.
Once we’ve found and purchased a home, it’s time for us to clean up the property. In many cases clean up and repair is a major part of the process. Typically, we might invest $15,000 in trash removal, repairs and minor upgrades such as new carpet, new paint, new windows and new light fixtures. Even after all of the repairs and upgrades, we are usually able to price the home at least $20,000 below what similar houses are being sold for. By keeping our margins thin we are able to find buyers quickly and sell most of our homes in 10 days or less.
We offer our homes for sale, first, through the Gorilla Capital Web site and by notifying buyers via Gorilla e-mail alerts. If that doesn’t result in a sale, we advertise in newspapers, list the home on Craig’s List, and list the home with real estate agents. Many buyers of Gorilla Capital homes are represented by an agent, but we also sell directly to homebuyers. Buyers who sign up and receive our e-mail alerts are able to view the home on our Web site (www.gorillacapital.com); they get the first opportunity to purchase the house and our homes are marketed exclusively to them before we notify real estate agents by listing the home in the Regional Multiple Listing Service. Thanks to the hundreds of customers who have signed up for Gorilla e-mail alerts, we sell about 20 percent of our homes in 72 hours or less.
Even as the housing market has been through some tremendous fluctuations, we’ve continued to follow the same basic business model. As we like to say, “We sell them cheap, because we buy them cheaper.” Most of the homes we sell are in the $100,000 to $180,000 price range, which has proven to be a desirable price point for homeowners and rental property owners alike.
Being at ground level during the dramatic increase in foreclosures has provided Gorilla Capital with a unique, practical perspective on the foreclosure process. Like any industry that is heavily reported on, there are myths about foreclosure that the media has propagated and the public has embraced. There are also some real policy issues related to foreclosure that need be addressed by our legislators. As the industry leader, part of our role is to attempt to educate the media and dispel the myths, but a more important role is to bring our knowledge and perspective to the public policy discussion of foreclosures.
As I mentioned, we have taken the position as one of the leading voices in the foreclosure industry in Oregon. This became an issue recently when Oregon joined the growing list of states seeking to amend their foreclosure statutes. In Oregon, the Legislature is considering the addition of a mandatory mediation process for home foreclosures. It’s a process that has been enacted in New Jersey and Ohio and is being considered in Nevada, Minnesota, Connecticut and other states.
The intent of mandatory mediation is to assure that homeowners are able to contact their lenders and attempt to negotiate a resolution in order to avoid foreclosure. Our company supports the public policy behind the proposal, but we also identified several technical problems with the amendment, including issues regarding the notice provisions related to the mediation process contained in the proposed statute. We have been instrumental in correcting and clarifying this proposal as it’s being drafted. We’ve offered testimony at legislative committee hearings and believe that our input has helped develop a foreclosure process that effectively addresses the legitimate interests of homeowners who seek mediation with lenders, while eliminating technical pitfalls and problems that would ultimately increase home ownership costs to the 99 percent of people who pay their mortgages on time.
As the state hammers out a mandatory mediation policy, we’ve encouraged the Legislature to consider all perspectives in the process. To my surprise, working with the Legislature has been a very positive experience. The legislators are men and women who are truly interested in identifying the key public policy issues relating to foreclosures and developing a workable solution that meets the many competing interests within an industry that has been highly publicized and widely misunderstood.
John Helmick is the CEO and co-founder of Gorilla Capital. To learn more about Gorilla Capital, go to www.gorillacapital.com.