Rehabbers cash in on foreclosure wave

updated 6:14 p.m. ET Dec. 2, 2007

MAPLE HEIGHTS, Ohio - After the unpaid mortgage bills, the creditor warnings and finally the sheriff's sale, it's sometimes left to a handy man like Adrian Brad to clean up the mess left by the nation's home foreclosure crisis.

"I'm not trying to become a millionaire," said Brad, a firefighter who has found a new part-time career buying and fixing up foreclosed homes. "It's something I do."

Most foreclosed homes are bought at auction by the lenders, get fixed by contractors who specialize in the work and return to the real estate market. Few get the attention of one-man operations like Brad's, according to Leo Baez, construction director in New York with Enterprise Community Partners Inc., which works on housing issues with neighborhood development organizations across the country.

Rehabbers gamble that the renovations they do — new carpeting, fresh paint, refinished floors, for instance — will enable them to quickly resell or rent a property. A rehabber's stake depends on the market and neighborhood, and that can be as little as $20,000 or $30,000 for a fixer-upper in blue-collar Cleveland, where a rehabbed home might fetch $50,000 or $60,000.

In the current down market, "If you can get away with 15 grand profit, shoot, I would take it," said Tony Patterson, who buys and fixes up two or three foreclosed homes a year, in addition to his home repair contracting business in Pittsburgh.

In a hot real estate market, Patterson said he can make $20,000 to $40,000 fixing up and selling a foreclosed home, sometimes turning them over in one or two months.

Brad rents out one rehabbed home, lives in the second one and took on a tougher project for his third: a three-bedroom, 1,150-square-foot bungalow with detached garage in a blue-collar neighborhood that has become a poster community for foreclosures.

Tony Dejak / AP Brad routinely heads to his rehab house for a day's work after 24 hours on duty at the firehouse in suburban North Royalton.

On a recent afternoon, for-sale signs were outside three of the eight homes closest to Brad's house in this city of 27,000. Some homes had a fresh coat of paint but others had a well-worn or vacant look.

The number of U.S. homes in foreclosure is expected to keep soaring after more than doubling during the third quarter from a year earlier, to 446,726 homes, according to Irvine, Calif.-based RealtyTrac Inc. That's one foreclosure filing for every 196 households, a 34 percent jump from three months earlier.

The Cleveland suburb of Maple Heights was ranked in the top one-half of 1 percent nationally in foreclosures by ZIP code.

A recent RealtyTrac listing showed 1,101 troubled homes in Maple Heights, including 199 on the auction block, 564 owned by banks and 268 in the early stages of foreclosure proceedings.

At a recent county sheriff's foreclosure sale, with Brad in the drab auditorium keeping tabs, the auction of more than 120 homes lasted about 81 minutes. Some homes failed to attract a bid, some were withdrawn, and most got a single bid, typically by the lender, for the minimum asking price.

Like loyal bingo players but without the occasional moments of excitement, a few dozen bankers and attorneys and a smattering of contractors and one-man operators like Brad assemble for similar scenes each Monday.

"If you're willing to work hard, there's a niche for you in this county," said Brad, who routinely heads to his rehab house for a day's work after 24 hours on duty at the firehouse in suburban North Royalton.

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