Lou Jarvis smiles as he stands in front of a beige house tucked into a gated community in Mesa, Ariz., a suburb of Phoenix.
"That's a perfect buy and hold," Mr. Jarvis says, staring at the front of the house as a dog barks in the backyard.
The house is slated to be auctioned off by the mortgage lender in a couple of hours and Mr. Jarvis wants to see whether it's worth buying. He checks over a sheet that indicates the owner bought the house, which has a two-car garage, for $155,000 (U.S.) in 2003. Bids today will start at $96,000. Mr. Jarvis is impressed by what he sees and figures the house will go for $105,000.
There's only one problem. The house isn't vacant and no one is home. That means the owner either doesn't know the house is being auctioned off today or is making one last effort to come to an arrangement with the lender.
Mr. Jarvis, who used to work at a building products company, spends almost every morning looking at houses like this one. He's a sales manager for Brewer-Caldwell Property Management Inc. and his job is to check out properties listed for auction at what are called "trustee sales."
Each weekday afternoon, two auctions are held on the front the steps of the Maricopa County Courthouse in downtown Phoenix. The auctions are a last-ditch attempt by lenders to sell a property. Some days, 700 houses are listed for sale.
One day last week, six men representing various lenders sat on green plastic chairs on a wide patio near the front doors of the courthouse. They all held a long list of properties. About 50 people milled around, cellphones in hand, ready to pounce. As each man barked out an address, a small crowd gathered, shouting out bids, usually in $100 increments. Winning bidders must immediately present a $10,000 down payment; nearly all of the bidders held small stacks of certified cheques.
Most of the bidders represent companies such as Brewer-Caldwell, which buy houses for investors. Mr. Jarvis said Brewer-Caldwell targets houses of about 1,700 square feet that go for between $80,000 and $120,000 at auction. The company usually spends about $2,500 on repairs and then sells the properties to investors, taking a 6-per-cent commission. The plan is to hang on to the house for five years and rent it in the meantime (with the help of a Brewer-Caldwell subsidiary).
Mr. Jarvis recently bought a 1,360-sq.-ft home in Gilbert, another suburb, for a client who lives in Chicago. The house has three bedrooms, two bathrooms and is in excellent condition. Bids started at $106,000, Mr. Jarvis got it for $111,500 and sold it to his investor client for $118,500. Brewer-Caldwell is now listing it for rent, so the new owner will have income while waiting for the market to rebound. "This could go for $250,000 if the market recovers," Mr. Jarvis said.