California's Discount Foreclosure Sales Point to Housing Bottom

Loan Values

Bank-owned properties attract investors who can rent out the homes for 10 percent of the purchase price annually, said Sean O'Toole, founder of real estate auction Web site ForeclosureRadar in Discovery Bay, California. ``Those deals are starting to pop up and putting a floor on the market,'' he said.

Bruce Norris, president of the Norris Group investment firm in Riverside, said he purchased foreclosed properties for one- third of the outstanding loan value during the past two months.
asr: Since Bloomberg published Bruce notes, it must be verified , adding to Bruce credit

Norris bought a three-bedroom home in the Moreno Valley section of Riverside for $106,000, a 65 percent discount on the $300,000 loan held by Bear Stearns Cos., now part of JPMorgan Chase & Co. He got a 61 percent discount on a home with $258,750 in loans held by Deutsche Bank AG, and a 63 percent discount for a home with $324,000 in loans held by Morgan Stanley, he said.

``The banks are stuck wholesaling to people like me,'' Norris said. ``They are starting to move product faster than the market would normally allow.''

Housing Bill

Banks will foreclose on about 700,000 properties with subprime mortgages this year, more than double the number a year ago, Sharga estimated. The increase is prompting overwhelmed banks to hire more workers to process purchase offers.