The Street By C.J. SULLIVAN

From Buyincomeproperties.com

Foreclosure
The Street By C.J. SULLIVAN
By C.J. SULLIVAN
Jul 10, 2005, 10:24

Learning the Secrets of the Steps
THE HIDDEN WORLD OF FORECLOSURE AUCTIONS AT 360 ADAMS STREET

UNDERNEATH THE steel-and-cement over-hang of the Brooklyn Court building on Adams Street, on practically any weekday morning, a crowd gathers on the steps of the court- house to buy foreclosed Kings County properties.
Here's how it works: A house is purchased in Brooklyn with bank financing. The owner, for whatever reason-loss of a job, divorce, bad tenants-stops making mortgage payments. The bank decides to foreclose on the house. A civil action is commenced in Supreme Court by the bank to reclaim the property. Most cases go uncontested (if strapped homeowners can't make mortgage payments, they probably can't spare a few thousand for a lawyer). The bank gets a Judgement of Foreclosure signed by a Supreme Court Justice, but the bankers don't want the house; they want their money back. So they auction it off.

About 2,000 Brooklyn homes change hands this way each year. The bank runs a notice for a few weeks in a local paper announcing that the property will be sold at a public auction to the highest bidder on the steps of the courthouse. And that's where the regulars come in.

"It's not as easy as it looks. These auctions can get pretty fierce, and you have to know what you're doing," says Mickey Higgins, 54, who works as a paralegal for Nationwide Court Services and goes daily to the auctions representing the plaintiff in the action, the bank.

"Every other month we get people who have seen some T.V. commercial on how to make a fortune in foreclosed properties. They think they are giving homes away out here. First, you need 10 percent of the sale price in either cash or certified check that day. If you make a bid and don’t have the money, the referee comes right back out and starts the bidding again. Secondly, most times you don't know what shape the house is in, so you don't know what you're really buying. And if the house has nonpaying tenants, they become your nonpaying tenants, and it will take a year to get rid of them. It's a tough racket for the single home buyer."

Higgins, from Bay Ridge, has an easy way about him, and is happy to break down the mysteries of public auctions. His only job is to make sure the bank gets its money. He knows the bank's upset price (the minimum they will take) and makes sure that the number is reached.

"I'll let all the bidders know we are starting the bidding at, say, $100, but my upset price is $131,000, so they might as well go from there."

The auctions are run by "referees," impartial lawyers who earn $500 a sale for reading the terms of the auction, checking in bidders, making the auction call and handling the transaction between the plaintiff and the buyer.

Higgins explains how the regulars have developed a system to keep the public confused. "You'll see ten people in front of me and the referee, but there's only three bidding. They bring extra people in for diversion. There are three main factions out here--two groups of Hasidim and one of real estate brokers. Sometimes they work together and sometimes they work against each other.

"The real estate guys really just want to sell mortgages," Higgins explains. "If they buy the property they try to sign it over to another guy and make a quick profit."

ON THE COURTHOUSE STEPS, ABOUT 15 men and women stand around nervously talking and squinting in the morning sun. A few lean against the courthouse wall, eyeing newcomers. One man grips the rolled-up sheet of paper that is the public auction bible-the Brooklyn Foreclosure Auction Schedule-known colloquially as the "Yellow Sheet" put out weekly for the last 10 years by Profiles Publications, Inc. in Jackson Heights, Queens (www.nyforeclosures.com). The 10-page bulletin gives the listings of the auctions going on in any given county, and some background information on the properties. The people getting ready to bid guard the yellow-colored sheets like they hold all the secrets of the human soul.

Keith Kantrowitz works for Power Express Mortgage Bankers in Great Neck and is a regular attendee at the foreclosure auctions. "I'm basically out here today looking to finance buyers," he says. "That's what my company does. The auctions are a good place to meet potential customers. Once in a while we buy."

A few minutes later the bank representative and referee show up and are immediately surrounded by anxious bidders. The first lot up for sale on this day is a modest one-family home at 5615 Avenue I. The referee, Barry Elisofon, reads a litany of rules that basically warns buyers that the property about to be auctioned is being sold in "as-is condition." The bank's representative starts the bidding at $24,000. It quickly jumps to $125,000. Keith Kantrowitz and a middle-aged Guyanese man in a flannel shirt get into a bidding war. "$135,000," Kantrowitz drones.

A moment of thought. "135,500!" counters the Guyanese man, folding his arm across his chest.

Kantrowirz smiles and ups his bid to $138,000. The referee looks around and says, "138 going once, 138 going twice " He pauses and takes a breath, "138,000, sold!" Kantrowitz, the referee and the bank's representative go through the revolving doors of the courthouse to sign the terms of sale.

"He says he's out here looking for customers, and then he outbids me on this house," says Safi Naziemul, the Guyanese man who is looking to buy some new properties to fix up and sell. Properties are listed in the Yellow Sheet, but buyers can only look at the exteriors of places that are up for auction to determine their condition. Some homeowners, angry at losing their homes, trash the insides of their houses, requiring thousands of dollars in repair. The interior configurations of the homes-the number of bathrooms in a building, for instance-are also a mystery to the bidders on the courthouse steps. It's a decidedly risky business for an outsider.

"It's tough out here. I think a lot of guys are in this together. You see them on their cell phones constantly talking. You're up against the banks and brokers," says Naziemul, "who are killing off the small buyer by bidding so high."

The action picks up again a few minutes later, with the auctioning of a one- family house on East 32nd Street. A statuesque middle-aged woman shows up as the referee and starts checking in the bidders. A long bidding war breaks out between two Italian men; eventually one of them gets it for $160,000.

The owners don't usually show up to the auctions. "When an owner shows up, it's almost like they don't believe that they're really losing their homes," says Higgins. "When I explain it to them, I can see their faces dropping as the reality sinks in. You see more crying than anger, although if they get mad at anyone it's at the referees because they're the ones who announce the sale."

Another auction begins a few minutes later, and the regulars crowd around a new referee. Standing off to the side, unnoticed by all the bidders, is a heavy-set Jamaican woman clutching a Judgement of Foreclosure. She looks helplessly at the proceedings as her house is sold out from under her. When the referee announces the winning price, she sighs. "I don't understand any of this," she mutters, walking slowly back down Adams Street.