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Maine's Foreclosure Market Heats Up

July 15, 2009 - PORTLAND — Debbie Kilmartin flips houses for a living.

The South Portland woman's goal is to buy a property, clean it up and sell it for a profit.

"I get in and I get out. I try not to be greedy," said Kilmartin.

She was among the dozen people who showed up Wednesday at a Portland office suite for a foreclosure sale presided over by Portsmouth, N.H., lawyer Jonathan Flagg, who had 100 Maine properties scheduled for auction.

Among the buyers were people looking for homes to live in and investors like Kilmartin trolling for bargains. By the end, three properties had sold, which Flagg called a boom day for a foreclosure auction.

The home-foreclosure market appears to be changing. More people are showing up at foreclosure sales, and more properties are selling. Foreclosure specialists say the trend is a sign that homebuyers believe the market has finally bottomed out.

At the same time, banks have become more flexible about working with homeowners who have trouble paying their mortgages, so fewer homes are entering foreclosure. The foreclosure crisis in Maine may be slowing.

BANKS WORKING WITH BORROWERS

The foreclosure rate in Maine has been higher than in most other New England states. The percentage of all home mortgage loans in Maine going into foreclosure in the first quarter this year was about 1.1 percent, second only to Rhode Island's 1.5 percent but below the 1.4 percent national rate, according to an analysis by the Federal Reserve Bank in Boston. The rate in Massachusetts was just under 1 percent.

Last fall, Sanford was anointed the state's foreclosure capital by the Maine Office of Community Development, after a study found that the southwestern York County town had more foreclosures than any other community in the state. Between September 2007 and November 2008, a total of 65 Sanford homes went into foreclosure. Lewiston was second with 44 homes, followed by Bangor with 32.

Since then, the number of foreclosures has inched down in Sanford, according to area real estate specialists.

The average number of properties in foreclosure each month is just over 20, according to a monthly compilation by Market Street Settlement Group, a real estate services company in Augusta.

Foreclosure numbers in other communities have been fluctuating this year. Portland had 28 properties in foreclosure last month, compared with only seven in January. But Lewiston had only eight listed in June, compared with 14 in January.

Realtors say the market for foreclosed homes is perking up, in part because mortgage rates are relatively low, and also because first-time homebuyers, who are entering the market in larger numbers, can get an $8,000 tax credit.

There is also a perception that bargains abound among foreclosed homes, which banks are eager to get off their hands.

"We are seeing better turnout, and properties are selling," said Stef Keenan, of Keenan Auction Co. in South Portland.

Another big change is a slowdown in the number of homes going into foreclosure, experts say. Flagg said he has seen a rise in the number of banks willing to work with homeowners.

His monthly foreclosure sale in Portland has been averaging about 100 properties statewide – up from 40 two years ago – but in recent months, only three-quarters of those properties have actually gone to the auction block.

The auctions of the other properties have been postponed or canceled at the last moment by the banks, which are increasingly choosing to work with borrowers rather than foreclose and take ownership of the properties, Flagg said.

"I have seen people get great deals to save their homes," said Flagg.

HOUSING AGENCIES FACE CHALLENGE

Sales of foreclosed properties are more robust than they were nine months ago. Housing authorities and other agencies in Maine trying to use federal money to buy foreclosed homes and resell them to low- and moderate-income buyers say they are finding it hard to compete with the private market.

Maine was allotted $19 million of the $4 billion Congress approved for the Neighborhood Stabilization Program last year. Sanford expects to get $1.8 million. The money is aimed at stabilizing neighborhoods with large numbers of foreclosed homes, such as in Florida, where entire streets have been vacated.

But in Maine, agencies are scrambling to find available foreclosed homes.

Bill Keefer, executive director of the Sanford Housing Authority, which is managing the Sanford program with York County Community Corp., said foreclosed homes are no longer languishing on the market.

Instead, the properties are being snapped up by private buyers who do not have to jump through the same regulatory hoops as his agency does. He said the list of available homes has shrunk as banks have become more willing to work with financially distressed mortgage holders.

"Banks are a lot nicer," said Keefer.

It is almost impossible for public agencies to compete with private buyers at foreclosure sales, where properties can often be had at bargain prices compared with those on the open market. The agencies must obtain an appraisal of a property before they make a bid. But at a foreclosure sale, properties are sold sight unseen.

It takes gumption to buy a house that might need major structural repairs, but more private buyers are willing to take that risk, say auctioneers and foreclosure lawyers.

Kilmartin does it all the time. She has flipped 60 properties in the past five years. This past week, she bought a Portland cape for $160,500 and the week before, a Portland two-family for $109,500. She said she aims to make a small profit, not a killing.

Sometimes it works out, sometimes it does not. This year, she was saddled with a house in Cape Elizabeth, carrying the mortgage, property taxes and maintenance costs for 10 months before she sold it.

"I had it under contract three times, but no one could get financing. I didn't lose, but I wouldn't call it a win," she said.

Steve and Carol Caron of Biddeford, at their first foreclosure sale, made a sole bid on a three-family apartment building on the Saco River in Biddeford. They said the property had been on the market for $200,000 in 2007. They bought it for $91,000.

"Did we get a bargain? Definitely," said Carol Caron.

But opening bids on the homes were not low enough for foreclosure sale regular Carleton Winslow of Portland. He owns 11 buildings, half of them bought at foreclosure auctions.

"I only am interested if I can legally steal something," he said.

By BETH QUIMBY, Staff Writer, Portland Press Herald, July 12, 2009


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