The house sits behind an upholstery shop on the corner, and while I'm too young to know for sure, I'll bet the upholstery shop has thrived since the streetcar ran down Gladstone Street in the 1950s. The house, like mine, was built in the first few decades of the 20th century. An old grande dame, she is, brilliant with leaded glass windows and gingerbread detailing and a formal dining room and built-ins that must have had the real estate agents in a tizzy four years ago when the market was so hot she was flipped twice in a season, sold last for $417,000 -- nearly three times what we'd paid for our house, a block away, in 2002.
When she was first for sale my husband, who's worked for a few of the city's top residential real estate agents, called his old friends, dreaming of an investment -- he loves how enormous and elegant she is. I told him it was a foreclosure waiting to happen: even pre-crash I could see it couldn't work. The numbers just didn't make sense; the house had been a rental for many years and, despite its great "bones," there were problems that would prevent even the slummiest of landlords from breaking even.
The neighborhood birds who roost under the bric-a-brac on the porch have whitened the front steps with their poop. The big, showy plum tree in the front yard yields fruits so small they haven't been harvested in decades, leaving an annual, sticky, pitty mess on the sidewalk. I can see telltale signs of much-needed structural investment on the foundation. It could have only been a labor of love, and that price, love couldn't pay.
I identified the potential pitfalls were we to invest in the property: a musty, mildewy smell wafted from the basement when we walked up the driveway; tenant reports of plumbing problems, an expensive red flag; a shopping cart and cheap liquor bottles in the space between the house and furniture shop, signs the homeless had taken up an itinerant residence here. And there was the price; even with a steep discount and at the most attractive interest rate, we'd need to clear $2,000 a month in rent to break even, a true challenge in this market where (admittedly far less spacious and lovely) apartments could be had for $600 to $750.
Still, I was sorry to be right. In October. when we saw the piles of furniture, paint cans and old fireplace grates sitting in the side yard, we knew the time had come. My husband quizzed the renters, buzzing with the possibilities: the owner planned to abandon the property, everything must be out in 24 hours. I predicted many, many months on the market.
I don't know, yet, if my prediction will hold true but I know, now, how to spot a foreclosure. Yes, there are the scary notices on the door from the lienholder, the speedy exit of the tenants; but those only appear for a few days, and then disappear in a wash of forgetfulness, a slate wiped clean. The lasting signs are the poop. Poop everywhere.
It is a yard with paving stones perfect for little boys' and girls' feet to hop from one to another, and as any mom is, I'm alert for the shoe-messing urban landmines. I've stopped watching out for them and now simply sound the warning before we reach the yard: "watch out, poop is everywhere." Unscrupulous neighborhood dogwalkers learn fast where they can let their pups relieve themselves without plastic bags, or guilt, and this is prime territory. The birds, now unhampered by mailmen or residents frequenting the stairs, have made the porch their permanent roost.
I called a friend who has been a real estate agent in Portland for 20 years, Alia Hazen. What's going on here?, I asked. Would this be a good buy? She remembered the property and we looked up the price: $315,000. "The market won't bear that," she said, describing her experience with foreclosures that sold: they had to be below the city's median price (here in Portland, $239,000-$245,000, she said), and then they'd be snapped up by developers who could charge enough to rent the property to break even until they could redevelop. Agents tasked with a foreclosure often didn't even visit the house for weeks or months; the bank would permit price drops every few weeks -- usually 3% at a time -- until the buyers sense a bargain. We have months to go before we reach that point.
The bird droppings, the neglected lawn, are signals the real estate agent has thrown up her hands, sure she won't be showing it until the price hits that invisible "bargain" marker.
Even then, she tells me, this isn't a suitable investment for regular homebuyers. Buyers of foreclosures can't qualify for FHA loans, the only ones most first-time buyers can manage; instead, they need 20% downpayments and great credit. The cost of repairs can't be packaged into the mortgage, as with many typical sales; if there are major structural problems or issues with plumbing, as with this home, the buyer must have the cash to make the repairs in addition to the large downpayment. And then there's the emotion, Hazen says: people like me (she knows me too well) can't hack the wait to hear back from banks, overstretched with foreclosure inventory and sometimes failing to respond to offers for four or more weeks. Developers, in this for the cash and not the lifetime, are more even-keeled.
It's not for us, despite the beauty. I walk past the house again. At once, I'm repulsed and fascinated, angry and intrigued. How long will the real estate agent ignore this property? How bold will the dog owners become? How common is this as a marker of a foreclosure?
As I walk and bike past this home and others on my everyday journey; I'm now alert for signs of other foreclosures, assessing their potential. Yes, there are the bright-colored notices, the moldy smells, the foundation cracks and crumbles, the liquor bottles; but I know to avoid foreclosures by the poop.
Investing in Startups
The lucrative and risky world of startups.View Course »