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In a hot foreclosure sales market, the latest trend taking shape is investors bundling their cash to buy bundles of homes.
They want to either mass cherry-pick the market or buy at discount from a bank, wholesaler or mortgage company.
Stockton real estate brokers report that a few buyers have tried to make multiple purchases, though without success because of competition for homes from families or investors buying single homes.
But Terry Hull Sr., a Stockton real estate developer and co-owner of a family-owned property-management firm, said he is organizing a group of as many as 50 local investors to pool enough money to buy 25 to 30 houses.
The timing is good. Federal mortgage giant Fannie Mae is opening an office next month in Irvine and another in Florida to speed up foreclosure sales and will consider bulk purchase offers.
Hull hopes to start purchasing by late September.
"That's going to be the first round," he said. "There are just phenomenal bargains out there, a ton of good buys. It's a fire sale, really."
Even with stiff competition for many foreclosure houses in the market, Hull doesn't anticipate having trouble buying the amount of properties they want.
"I can go and buy houses all day long - and I will," Hull said. "I truly believe this is a very unusual opportunity."
There's no worry about renting them, either, said Hull, whose family owns Property Management Experts, a Stockton-based company that manages apartment complexes, duplexes, triplexes and rental homes from Elk Grove to Fresno.
Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton, said several local people have tried to buy 15 or 20 homes, but they were able to get only a few.
"By the time the banks got back to us, half the houses were already sold," he said.
Competition already is stiff for many foreclosure properties, especially those in the lower price range, he said. If bulk buys become part of the sales scene, he said, "that's going to make what's left even hotter."
Existing-home sales - mostly foreclosures - have been on the rise since January in San Joaquin County, with closed sales topping 1,000 last month and pending sales coming in at about 1,550. This with fewer than 4,600 houses on the market in July.
Ben Balsbaugh, residential sales manager for PMZ Real Estate in Stockton, said that sometimes an investor will call with a bulk-buy idea, but it seems to always die out.
"I haven't seen anyone who has done it, but I certainly have heard individuals talking about the idea," he said. "I am not sure why the banks would want to go this route, other than to clear inventory. They would almost certainly get more selling them individually on the open market."
Mark Plovnick, CEO of the San Joaquin Angels investors group as well as director of economic development at University of the Pacific, said an investment partnership such as that being shaped up by Hull sounds like a terrific idea.
"A general economist's rule is buy low and sell high - and it's low right now," he said. "Maybe it will get a little bit lower, but I think this is a good opportunity."
And most smart investors say you make your money on the buy, not the sell, he said.
But he cautioned that there would be a disadvantage for bulk buys that involve buying a list of properties.
"You can cherry-pick and get good value and be safer about what you're buying," he said. "If you're buying in bulk, you get the good with the bad."
Hull said the group will buy in bulk only if it could still select each property.
"The old standard of 'location, location, location' still stands," he said.
Hull said the partnership will raise $1.25 million toward 20 percent down payments, and loans already have been secured from a mortgage company. Twenty investors already have bought in at $25,000 per share, he said.
The buyer of one share is Bob A. Sullivan, a semi-retired owner and broker of a Stockton real estate firm. He said he expects to no less than double or triple his investment.
"What I like the best is the timing to buy," he said. "Prices are really depressed right now. In my mind, there's no question that prices will go up again considerably. Whether it's one year or five years, I don't know. I don't see any downside."
Shane Hart, senior vice president in charge of acquisitions, development planning and marketing for the Stockton-based Grupe Co., said the company has looked at buying foreclosed homes in bulk from banks.
But they haven't tried to buy because the bulk price of the homes hasn't been low enough to be able to fix them up and resell at a profit, especially with home prices continuing to decline, he said.
Also, most of the bulk offerings the company has seen include houses from all over the country, or at a minimum, throughout California, he said, and the company is not set up to evaluate, manage, fix up and sell homes outside of Northern California.
Contact reporter Bruce Spence at (209) 943-8581 or bspence@recordnet.com.
