SACRAMENTO — At the beginning, Alejandro Maybuena lost the house he bought in April 2005 for $350,000. At the end, in early 2009, Kim Gish bought it for $109,000.
Stories like this have happened more than 40,000 times in the Sacramento area. Still, the tale in particular of one house in California's capital region shows the sweeping change in a real estate industry that once involved mainly a mom-and-pop seller, a buyer and two real estate agents.
Today, an alternate universe — the repo business — dominates. And business is very good.
As the U.S. foreclosure crisis grinds on, the detailed work of processing, repairing and selling thousands of homes repossessed by banks is real estate's new gold. In the past year, repo-related business has rapidly grown to national scale, fueling job growth in Colorado, Texas, Ohio and elsewhere to service the meltdown in markets like Sacramento and the Central Valley along with Phoenix, Las Vegas and Florida.
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The nation's housing collapse also has upended the pecking order of real estate agents. Former top earners are on the sidelines, unable to move expensive homes. The new royalty is making good money in a real estate economy where things fall apart and trackers count almost a half-million repos on the U.S. market.
"From an industry standpoint, everybody who participates has seen an uptick in their business," said Paul Carlson, senior vice president of human resources at Austin-based Field Asset Services.
Carlson's firm, which repairs, cleans and maintains repos right down to mowing the lawns weekly, has almost tripled its hiring in the past 18 months. Austin business publications gush over the firm's "hiring spree," its 550 employees and third expansion into larger offices in a year.
Clearly, the housing distress that has overwhelmed states like California has become big business. Yet, it always starts small, one house at a time.
For Alejandro Maybuena, 60, and his wife, a three-bedroom house near Sacramento's southern edge in 2005 represented a long-delayed accomplishment — their first house.
It wasn't easy buying then, not in that last roaring spring of the housing boom. Maybuena, a custodian for the city of Davis, said the house was the eighth they'd bid on as frantic buyers competed to get in before prices rose higher.
"My agent said I should offer another $10,000. All I could think of was how many more months I'd have to work to pay that off," he said.
But he made the $350,000 offer with the assumption, then so widespread, that prices would keep rising.
Instead, values crashed. The rest is the same old story: inability to refinance, get a loan modification or rationalize making $2,500 interest-only monthly payments on a house no longer worth the price paid.
"It was a dream for us," Maybuena said recently, standing in the doorway of an Elk Grove house he rents for $800 a month. "But, unfortunately, our dream was ruined."
After foreclosing, Texas-based American Home Servicing Inc. — which services 575,000 loans nationally — started the repo clock ticking. It assigned the house to Bruce Slaton, a Keller Williams real estate agent in Elk Grove. Slaton specializes in REO sales, shorthand for "real estate owned," the industry term for bank repos.
In a normal real estate market, Slaton might get listings from open houses or word of mouth. Now he gets them directly from banks or asset management companies hired by banks to sell their houses.
In this case, he got an e-mail from American Home Servicing, which has an in-house asset management division. There, he's a known commodity.
"I got into bank stuff about 2000," said Slaton. "When the market changed (toward distress), I was in the system."
Also in that system are the national corporate giants and smaller regional players that have long helped lenders manage and sell repos that come in good markets and bad. Business has soared. Slaton said banks outsource up to 80 percent of foreclosed properties to third parties to handle.