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Thursday, Dec. 18, 2014

Speculators slow community's effort toward redevelopment

Thursday, March 15, 2007

(Photo)
Trey Hardy, community redevelopment coordinator, left, dicusses the city's plans for properties on Agnes Street with Eddie Morris.
SIKESTON -- A number of homes targeted by the Land Clearance Redevelopment Authority for acquisition that were bought by out-of-town speculators are now in or near foreclosure.

"Investors from out of the area saw the opportunity to purchase the property at what they thought was fair-market value," said Sue Rogers of First Realty and an at-large member of the Sikeston City Council. "They did not use local appraisers because their lenders were not from here in town."

These speculators -- some of whom bought as many as 10 to 15 properties -- have now realized they paid too much and won't even be able to recoup their money, have simply "walked away" from their properties.

"The banks are getting no more money so foreclosure is imminent," said David Ziegenhorn, chairman of the LCRA. "I think a lot of those people invested in properties they had no knowledge of and ended up making bad investments. That's why they're walking away from them -- they found out after the fact how badly they'd done."

Ziegenhorn offered as an example a woman from St. Louis he knows of who bought at least three or four of the Sikeston properties. "She closed on the properties in August of last year and they're already in foreclosure," he said.

In addition to paying inflated prices, many of the speculators were also dealing with poor financing arrangements.

"There are a number of pieces of property that had what they call sub-prime loans that they must pay above-average interest rates on. As a result of the very high payments, the prospective home owners have lost their properties," Rogers said. "It is a nationwide problem right now. The foreclosure rate has gotten very high."

Those with lower credit scores end up paying higher interest rates, Rogers explained, though "secondary market" loans. "I've seen them pay anywhere from 9 percent to 12 percent interest because of their credit scores," she said.

"These loan companies that deal with sub-prime loans saw the opportunity that they could get out here and get more loans while the market was hot," Rogers added. "They were able to make loans to people that financially were already stretched to their limit. They put the higher-priced home loan on there and they just ended up going backward instead of forward."

The loan companies saw "quick money for them," she said. A number of the lenders that offered the sub-prime loans, however, have now shut down after selling off their loans to other mortgage companies, Rogers said.

The result of the investors buying the homes at inflated prices and then defaulting on the loans for Sikeston was moving back the timetable for action by the LCRA -- an already time-consuming process.

"What it's done with some of these properties is put off our acquisition of them 12-18 months," Ziegenhorn said. "We were in the condemnation process on some of these. The houses got sold to new investors and the new investors put occupants back in them."

Ziegenhorn said in some cases, the new owners did spend some money to bring them back to property maintenance code and general building codes to put occupants in them -- but just barely.

On others however, "some of them flipped and got occupants in them before code enforcement could even inspect them, so there's a chance some of them didn't meet code," he said.

In addition to delaying the LCRA's process by as much as a year and a half, in many cases it has also complicated things for LCRA officials. Now instead of working with local owners and lenders, LCRA officials must negotiate with mortgage companies based in places like New York or even overseas in some cases.

The LCRA is now acquiring some of the structures at 10 cents on the dollar in many cases "due to the inflated values on the houses when they were sold," Ziegenhorn said. One house recently acquired by the LCRA had a $46,000 loan "and we paid $5,500 for it," he said.

Rogers said she believes most home owners "sold them in good faith. They saw the opportunity to make a buck."

Whether they knew they were selling at inflated prices or not is anybody's guess.

In "walking away" from what they realized were bad investments, the new owners failed to pay property taxes in many cases.

"According to the Sheriff's Department, there were approximately 50 properties that will be sold on the courthouse steps," Rogers said.

On the other hand, there are some investors who are buying homes in poor shape at their real value and then putting enough money into rehabilitating them so they become nice homes again "which is a plus for Sikeston," Rogers said. "We've got a lot a good citizens who are trying to invest in our town and make it better."