Mr. George Roddy, Sr., President of Foreclosure Listing Service, Inc., announced, “So far this year, foreclosure postings filed on D/FW commercial properties were up 51% compared to one year earlier.  From January through the upcoming foreclosure auctions in September, 2,541 postings have been filed on commercial properties in the Metro compared to just 1,680 for this same nine-month period last year.”

OK, here’s the feel-good take-away: it’s still not as bad as the late 1980’s when around 8,000 commercial postings were filed in just one year.

More tequila!

Addison, TX — Foreclosure Listing Service, Inc., which has been monitoring foreclosure posting activity more than four decades, released the findings of its recent study of foreclosure postings filed on commercial real estate located in the Dallas/Fort Worth Metro for the first nine foreclosure auctions of the year (January – September).  Since the filing deadline has already passed for filing postings for the upcoming foreclosure auctions in September, FLS is able to analyze and release commercial posting activity for the first nine foreclosure auctions of this year.

Mr. George Roddy, Sr., President of Foreclosure Listing Service, Inc., announced, “So far this year, foreclosure postings filed on D/FW commercial properties were up 51% compared to one year earlier.  From January through the upcoming foreclosure auctions in September, 2,541 postings have been filed on commercial properties in the Metro compared to just 1,680 for this same nine-month period last year.”

He remarked, “Still, this is nothing compared to the crisis in the late 1980’s when around 8,000 commercial postings were filed in just one year.”

These foreclosure postings included all types of commercial real estate: such as, retail centers, retail buildings, office buildings, industrial buildings, apartment complexes, unimproved commercial land, and miscellaneous commercial buildings.

Mr. Roddy remarked, “Certainly, by shear volume, there has been more foreclosure postings filed on homes than on commercial properties. Around 48,000 postings have been filed on D/FW homes so far this year compared to about 2,500 notices against commercial properties.”

The foreclosure researcher continued, “Postings of residential homes are much further along on this cycle’s highway than are commercial postings.  Even though postings of homes remain on the high-end of the cycle, the percentage gain is not as significant as in past years since the home market has been on the high-side of the foreclosure cycle for some time now.  Residential postings for the year-to-date were just 7% higher than at this time one year ago. Conversely, posting activity has climbed at a much steeper pace on commercial properties than on residential.  Commercial posting activity for the year-to-date has surged 51% over the last year.”

COMMERCIAL POSTINGS BY PROPERTY TYPE:

Mr. Roddy said, “The top two hardest hit commercial property types, in terms of percentage gain, were miscellaneous commercial buildings and land.  Postings of miscellaneous commercial buildings soared 92% and postings filed on tracts of land jumped 71%.”

The foreclosure researcher said, “So far, the burden of suffering through this round of foreclosure postings has been upon the shoulders of tracts of land and miscellaneous commercial buildings rather than traditional commercial buildings, which have experienced only a 19% increase in year-to-date posting activity over the past year.  So far this year, 1,001 postings have been filed collectively on office buildings, industrial buildings, retail centers/buildings, and apartment communities compared to 840 notices by this time last year.”

MISCELLEANOUS COMMERCIAL BUILDINGS

Mr. Roddy stated, “The largest gain in D/FW commercial posting activity was found among miscellaneous commercial buildings.  With a 92% surge, postings of the miscellaneous commercial buildings escalated from just 489 for the first nine auctions of 2009 climbing up to 940 so far in 2010.”

Mr. Roddy continued, “I am not surprised by this surge.  Many of these miscellaneous buildings are owner-occupied or single-tenant users, who were on commercial real estate’s front line during this economic crisis.  So many ‘Mom and Pop’ businesses have been forced to close during this struggle.  Simply put, closures mean no rent collected; and, no rental income leads an inability to pay debt service (the building’s mortgage).”

The foreclosure analyst reflected, “The fact that miscellaneous commercial buildings led the pack in foreclosure posting gains over the past year points to one of the most significant differences between today’s foreclosure market versus back in the real estate crash of the late 1980’s.  The difference is the quality or lack of quality in this case, of properties being posted.  In the late 1980’s, I saw a significant amount of signature, Class A properties posted for foreclosure.”

Mr. Roddy remarked, “Although I am seeing some Class A properties posted for foreclosure, like the Four Seasons Resort that was posted earlier in the year, but still the vast majority of the commercial properties posted for foreclosure in today’s market are either Class C properties or miscellaneous commercial buildings.”

In addition to ranking first in percentage gains in commercial postings, miscellaneous commercial buildings comprised the largest individual share of the commercial postings filed by representing 37% of the total commercial foreclosure postings recorded so far this year.

Included within this property category are all miscellaneous commercial buildings: such as, convenience centers, car washes, restaurants, hotels/motels, day care centers, auto repair centers, auto dealerships, duplexes, funeral homes, recreational facilities, etc.

COMMERCIAL LAND

Mr. Roddy said, “The second highest gain in posting activity among the commercial property types was a 71% jump in postings filed on tracts of unimproved land.  So far this year, 600 postings have been filed threatening tracts of raw land with foreclosure compared to 351 notices by this time last year.”

The foreclosure analyst commented, “Land speculators and developers were the second tier of commercial properties to feel the pain of this economic crisis, right behind the miscellaneous buildings.  As signs of this crisis appeared, money for development dried up or became too costly.  As a result, many land developers and speculators have been left in a lurch with debt service eating away at their pocketbooks.  For most, there is a limit to how long they can hold on; and, many have reached or passed that point.”

Postings of commercial land represented 24% of the total commercial foreclosure posting activity so far in 2010.  This was the second highest share of commercial posting activity, following behind postings of miscellaneous commercial buildings.

INDUSTRIAL BUILDINGS

Mr. Roddy stated, “Ranking third highest in posting gain among commercial property types was the 34% jump in postings filed on industrial buildings.  From January through the upcoming auctions in September, 171 foreclosure notices were filed against industrial buildings in the Metro compared to 128 notices for this same period one year earlier.”

Included within this property category are warehouses, office warehouses, office showrooms, general industrial buildings and manufacturing buildings.  Mini-warehouses are not included in this property classification.

Postings of industrial buildings equated to only 7% of the total commercial posting activity so far this year, which was the lowest market share among the commercial property types.

OFFICE BUILDINGS

Mr. Roddy commented, “Over the past year, foreclosure postings filed of D/FW office buildings increased 22%.  So far this year, 220 postings have been filed on office buildings located within the Metroplex compared to 181 for this same period last year.”

Foreclosure notices filed on office buildings comprised just 9% of the total commercial postings filed year-to-date.

APARTMENT COMMUNITIES

Mr. Roddy said, “Foreclosure postings filed on D/FW apartment communities also rose 22% over the past year.  From January through the upcoming foreclosure auctions on September 7^th, 376 postings have been filed on apartment communities compared to 308 by this time last year.”

“The majority of apartment complexes posted for foreclosure this year have been Class B & C properties, not the Class A signature projects.  Although I have seen a few Class A communities posted for foreclosure.” Mr. Roddy revealed.

Foreclosure postings filed on apartment complexes equaled 15% of the Metro’s total commercial posting activity so far this year.

RETAIL BUILDINGS/CENTERS

Mr. Roddy commented, “Foreclosure postings among retail centers/buildings climbed 5% over the past year, from 223 postings for the first nine auctions of 2009 increasing up to 234 so far in 2010.”

“Like with the other property types, the vast majority of the retail centers/buildings threatened by foreclosure were Class C properties, which were generally smaller in square footage size and older in age,” Roddy remarked.

“However,” he continued, “this does not mean that I am not seeing any Class A or signature retail centers posted for foreclosure.  In fact, I am seeing some larger centers posted and actually foreclosed on, like the Golden Triangle Mall in Denton that was posted and foreclosed on at the July foreclosure auction in Denton County.”

Notices filed on retail building/centers comprised just 9% of the total commercial postings filed so far this year.

COMMERCIAL POSTINGS BY COUNTY:

Mr. Roddy announced, “Foreclosure postings filed on commercial properties have increased in all four counties within the D/FW Metro.”

COLLIN COUNTY

“The largest gain in commercial posting activity,” Mr. Roddy stated, “was an 83% jump in Collin County.  So far this year, 311 postings have been filed against commercial real estate in Collin County compared to just 170 foreclosure notices by this time last year.”

He continued, “In Collin County, five of the six property types experienced an increase in posting activity with four property types having a gain of 65% or more and two of those property categories reeling from a 100% plus gain in postings.”

“The largest gains in Collin’s commercial posting activity were a 108% jump in postings of land and a 103% surge in postings of office buildings,” Mr. Roddy commented.

Mrs. Peters’ husband died in 2008 after an illness that may have left the family struggling for money.  Foreclosure Listing Services estimated that the Peters owed $235,000 on the home, which they had owned since at least 2000. Which means there must be significant equity in the home that perhaps Mrs. Peters planned to use to finance Corinne’s college tuition IF she was really planning to go to college. Sometimes kids do not want to follow the plans their parents set out for them. This picture of personal and financial struggles is so sad to see emerging, and I wonder how much of it will center on the family home.

One more thing: I note that in the Dallas County Appraisal District records, the family home is still listed under Mrs. Peter’s late husband’s name, Donald L. and Jayne Peters, even though he has been deceased since 2008. I know it took me nine full months to even begin to sell the items in my mother’s home when I lost her, but I wonder if that is fairly common or was Mrs. Peters so distraught over her husband’s death that she could not bear to remove his name from the records?

Trulia says it’s listed with James McKissack of Keller Williams up in Denton. I’m still trying to figure that one out.

So here’s the deal, Steve. You buy drinks and I’ll give you the run-down on what I’ve got on tap for next week, and all your real estate stories will be sewn up for the year!

Say your home gets foreclosed on. What then? Your options are to file for bankruptcy or pay off the deficiency balance, which is the amount you are liable for on the note after the foreclosure sale. But what many people don’t know — in fact, I learned this just at dinner last night — that figure can usually be reduced to pennies on the dollar outside of filing bankruptcy IF you hire an attorney to negotiate with the mortgage company. And the mortgage companies are getting so bankruptcy weary, they are in a more negotiating mood, says Jacob A. Decker, an attorney with Allmand & Lee.

“The large five mortgage companies are really talking turkey now, ” says Decker. “Last week, I settled one deficiency balance of $65,000 for less than $5,000.”

The trick, he says,  is to work with a bankruptcy law firm that deals with the creditors on a daily basis in a bankruptcy context. That way, the lenders know that if they do not settle for a  pennies on the dollar, the next step will be a bankruptcy filing where they will likely get zilch. A couple thousand versus zero? Decker says the lenders will almost always take the money.

Toss in cash-strapped tenants who are filing to wriggle free of long-term leases, bankruptcy attorneys are busier than they have ever been, says Decker. He’s also seen a significant increase in creditors’ willingness to settle other debt — renegotiate auto, student loan and even credit card debt. Bankruptcy attorneys are raking it in. Full disclosure: I have first-hand knowledge of how hard they’re working and am not complaining one bit: Decker is my new son-in-law!

One, I cannot believe how archaic the process is. A bunch of hot people standing outside the George Allen Courthouse, lawyers in suits  (low wool content, I hope). We could have used chair massages and Slurpee’s, and where’s the potty? At first we went to Lew Sterrett Frank Crowley, I pulled out the Handi-Wipes, but was re-directed to 600 Commerce after passing my handbag through the metal detector. Veterans tell me that folks didn’t like being at Lew Crowley for obvious reasons. So we get to 600 Commerce and like a sidewalk fair, everyone is  standing outside under the overhang, where I stayed remarkably comfortable for a July day in Texas. (Note to Dallas County: exterior ceiling fans.)  A few people did stop and ask if this was a fair or something. It was hot, but could have been worse.  Pity the poor trustee  who was off next to Tarrant County’s auction — it is held on the west-facing courthouse steps, outside, no overhang.

Foreclosure attendees consist of four basic food groups: newbies, like me;  investors (serious), also known as vultures; bank reps — I learned many of the banks buy back their own properties so they can re-sell them; people desperately trying to save their homes. The atmosphere is almost camp-like, since the savvy bring coolers and those fold-able camp chairs — one trustee even had a camp battery pack and fan. Paperwork is kept in rolling file cartons a la the Container Store. The American Dream is in full force — one person’s loss is another’s bargain.  Most folks are dressed casually save for the few dedicated attorneys in suits who stand out like hot, sore thumbs, but at least you can see them as they read off their prepped legal docs — same verbiage, different debtor: “Whereas on August 12, 1999, Michael Jackson, a single man, executed a deed for the sum of $500,000 in Dallas County…”  You cannot hear  very well as the buses, planes and sirens are out-screeching  words, so everyone leans in close, creating a huddle around each trustee. I saw one bid start at $80,000, the home sold for $214,000. (Interesting, the guy waiting to about $150K to jump in.) The bidding on some properties  started at a dollar. One Lakeridge property owned by Bank of America started at $24,650, and I wrote about a four million dollar property out there. Someone cleaned house on a $5 million dollar downtown commercial property they snagged for $3 million. The blood thirst for bargains was thick: I was back at the silent auction table at a charity fund raiser where an aggressive broad planted herself in front of the sign-up for lunch with Nolan Ryan at The Ballpark, or at Filene’s Basement with La Perla fifty cents a pair.

To do this right, you need a mentor, and mine was Virginia Cook’s Kyle Rovinsky, a D Best Realtor, and foreclosure auction vet. We wanted to be “in the pit” by ten a.m. and almost were save for the Lew Sterrett detour. The good folks at KERA were there filming a special on mortgages and foreclosure that runs July 21 –I chatted with the delightful BJ Austin and helped them find “who was in charge.” That was an excellent question, actually, because at the forclosure auction it seems that no one is in charge. You must buy the foreclosure list from Roddy’s Foreclosure Listing Service, Inc. to even know what is for sale,  who the trustee is, although a new company, Lone Star Foreclosures, is coming to cover Hunt and Smith Counties: one person’s poison is another’s paradise. Veterans buy the list days ahead,  (this month’s was about 136 pages long) scrutinize and organize it into the properties of interest. The trustee doesn’t just shout out the street address. They call the legal property description,  lot and block number, so you really have to know what you are looking for.  The Roddy’s people put name tags on the trustees — lawyers who work for the banks or mortgagors — and would occasionally shout out the name of the trustee for all to hear. No megaphones, no microphones, and a few lenders will send out a cameraman to document the process.

As for the people, they ranged from the pros working for real estate investment companies to individuals, like the woman and her family who have been buying foreclosed properties for 30 years. She was the one out-bid by a man on an east Dallas property she told me was owned by an older Vet who had fallen behind on his payments — she wasn’t sure what she would have done with the home had she bought it, but she was out-bid so the issue was moot. Though the banks will start bidding at a dollar, they will not let the property out the door at that price. Once the bidding starts, a bank rep will bid it up. You can pick up some real dogs if you don’t know what you are doing — these properties, one veteran told me, sell “as is” and unless you’ve gotten title work you could turn around and have to pay out thousands in unpaid liens, property taxes, not to mention repairs. That’s why you really need the list early  and need to research the properties.  Also, many homes on the list never make it to the auction, like 3616 Beverly. People make midnight deals — even 9:00 a.m. deals — with the lenders to save their home. I was told of a local home builder who has been “saving” his properties the night before every auction now for six months. Still, one expert told me that a smart buyer can pick up a home for 30% less — he strongly suggests that if you have your eye on a property, go ahead and pay for the title work prior to the auction.

I met one young eager investor who started buying buying foreclosures one year ago — 50 units. He put in about $15,000 in repairs and sold for a profit. But this is such a depressing market, I said. Not so, he said, this is when you make money, when the market is down. Quit listening to the media. But what, I asked, what if it NEVER comes back, at least not for a very long time? Doesn’t matter, he said, as long as you buy it right. There is this thing called seller financing.

Real estate, he said, is very much like poker: matters not the cards you are dealt, it matters how you play the game.