More than 300 homes on auction block

In the largest sell-off of its kind in Minnesota, more than 300 foreclosed homes across the state will go on the auction block this weekend.

The mass two-day sale at the Minneapolis Convention Center will unload one-bedroom condos, tiny ramblers, stately gabled Victorians and even sprawling suburban houses to the highest bidders. Repossessed after their owners didn't make payments, the properties are victims of a real estate market devastated by the subprime mortgage meltdown.

Minnesota Association of Realtors vice president Chris Galler said it's the biggest auction he's seen in his two decades in the business. Auctions normally dispose of a half-dozen to a dozen homes. "It's a sign of the times," Galler said.

For Irvine, Calif.-based Real Estate Disposition Corp., the boom in foreclosures has meant opportunity. The company has criss-crossed the country auctioning as many as 600 repossessed homes at a time. The company has stopped in about 10 cities this year and has five more scheduled after Minneapolis.

"It seems like six months ago the spigot was turned on and all of a sudden there was a lot of inventory," said Real Estate Disposition Corp. Chairman Robert Friedman.

The properties listed offer some enticing potential bargains. At a starting bid of a mere $9,000, someone could pick up a 1,072-square-foot cheery home with red shutters, hardwood floors and 1907-vintage woodwork on Upton Avenue in north Minneapolis. It was once valued at $47,900.

Across the river in southeast Minneapolis, a 1,574-square-foot unit 14 floors up in the La Rive condominiums is vacant and awaiting a new owner. It has shell-shaped his-and-her bathroom sinks, updated appliances and sweeping views of the historic riverfront. Previous valuation: $515,000. Starting bid: $229,000.

Looking for a suburban retreat? A 1978 home in Shakopee offers three bedrooms, three baths and a 1-acre lot with 150 feet of shoreline on O'Dowd Lake. Previous valuation: $710,000. Starting bid: $229,000.

Real Estate Disposition Corp. got its start with property auctions in the 1990s. Properties auctioned that decade originated with developers and, unlike this year's auctions, not from homeowners who defaulted on mortgage payments.

The number of houses being auctioned today and Sunday isn't even a notable fraction of the number of foreclosed homes in the state.

According to the foreclosure website, www.realtytrac.com, there are about 8,900 foreclosed properties in the seven-county metro area.

Last month, foreclosures in Minnesota were up 183 percent from a year ago, to 1,510. The rate was one filing for every 1,491 households.

Minding the neighborhoods

Hennepin County Commissioner Gail Dorfman may show up at the auction today but not because she's thrilled with the event. Dorfman fears that investors without a stake in the community will snap up the homes and overload already fragile neighborhoods with more rental properties.

"These neighborhoods where we've seen concentrations of foreclosed homes are neighborhoods where we've been investing in, so we feel this is undercutting our public investment in building healthier communities," Dorfman said.

Dorfman pointed out that the auction's on-site financing is provided by Countrywide, the nation's largest mortgage lender and one buffeted by defaults on subprime mortgages.

One possible reason why the large-scale auctions are booming is that lenders found themselves with a glut of properties and couldn't sell them through traditional means, said University of Minnesota associate law Prof. Prentiss Cox, a former assistant attorney general who tracks the issue.

Lenders first held onto the homes thinking they could eventually turn a profit, but with prices depressing, the "dam broke" and they finally decided to cut their losses, he said.

"To have this kind of mass public auction is really unusual," Cox said.

Friedman said he expects as many as a 1,000 bidders each day, from investors who might rent out the property or renovate and sell it -- to "end users," people who will live in the homes they buy. Many bid prices listed on the company's website start at less than half of a home's assessed value.

The company's 11-page terms-and-conditions document and Friedman strongly urge bidders to inspect properties that they're interested in buying (open houses were held earlier this month) and research housing prices. Homes come with no guarantees or warranties and penalties are levied against buyers who back out of a sale.

Friedman said the bidding process is simple, but Galler cautioned first-time home buyers with little experience from jumping into the fray.

Unlike a home purchased through a real estate agent, the seller at an auction doesn't have to tell the buyer anything about the property, such as possible structural problems or upcoming nearby street construction that a seller might know about.

"This is not an auction for amateurs," Galler said. "If the deal looks too good to be true, it is."

Staff writer Lora Pabst contributed to this report. Chao Xiong • 612-673-4391

Chao Xiong • cxiong@startribune.com