With the significant increase in foreclosures and the declining
real estate market in the late 2000s, foreclosure themed websites are springing
up like weeds during the summer heat and thunderstorm season. Often, these
sites hype the big money you can supposedly make buying foreclosures and
downplay or ignore the major risks with buying and investing in foreclosed
properties.
Among the various foreclosure websites, the biggest and most
widely publicized through the mass media has been RealtyTrac, which is widely
cited as the source for national and state foreclosure statistics. When you
read and hear news reports about foreclosures increasing a certain percentage
in the latest month, RealtyTrac is typically the source for the news media of
such data.
When I frequently saw RealtyTrac data, I wondered who they
were and why they were collecting and publishing foreclosure data. After
spending time on their website and doing some research, it became clear that RealtyTrac's
primary business is actually in selling access, through a $49.95 monthly
subscription fee, to their foreclosure listings.
Customer Complaints
Unfortunately, RealtyTrac seems to have plenty of
disgruntled former customers with common complaints. The Better Business Bureau
of the Southland in the Los Angeles,
CA area has logged 199 complaints
against RealtyTrac over the past 36 months. The firm's current rating is a 'B'
which is the in the sixth tier of ratings - 'AAA' is the highest, followed by
'AA', 'A', 'BBB', and the 'BB'. However, on RealtyTrac's "Member
Benefits" page, in the "Company Accolades" section of their
website, they erroneously claim an 'A' rating with the Better Business Bureau. (RealtyTrac
has also had plenty of complaints on the Ripoff Report website for a variety of
concerning issues.)
The case of dissatisfied customer John Gassett, who signed
up for RealtyTrac's "free trial" in 2006 to access their foreclosure listings
is typical among the firm's complaints. Gassett told me that he was extremely disappointed
with the prevalent inaccuracies he found in RealtyTrac's local area listings he
searched through looking for potential foreclosure properties to purchase. "The
information was very dated and very inaccurate. I was finding properties that
had already sold six months ago. The address for one property was for a church,"
he told me in a recent interview.
Gassett's experience with RealtyTrac, he says, went from bad
to worse when he attempted to cancel his subscription before racking up $49.95
monthly fees. "Trying to even reach them was horrific...they did everything that
they could to avoid interactions with customers," says Gassett. He says that he
contacted them by phone, sent numerous emails all without success. After two
months of credit card charges, he had to step up his efforts by disputing the
charges through his credit card company. RealtyTrac failed to back down so
Gassett finally got his attorney (a relative willing to work pro bono) involved
to finally get the monthly charges dropped and his account canceled.
Rick Sharga, Senior Vice President with RealtyTrac told me
that he isn't familiar with the specifics with why Gassett complained about
their service. "We believe that we have the best foreclosure data on the web.
We do what we can to update our database. Our users need to be educated to
understand what they're looking at. Churches do go into foreclosure."
Sharga is correct about prospective real estate investors
needing to be educated before investing in foreclosures and about even churches
ending up on the auction block. Investors should get educated first about the
realities and challenges to researching and buying foreclosures. Yes, some
folks may get a good buy on a property but too often people end up buying a
property with all sorts of hidden trouble. That's why a foreclosure purchase
should likely not be your first ever real estate purchase. Foreclosure
purchases are more complicated and risky transactions and should be at least
your third or fourth real estate transaction. You may not be able to have the
property professionally inspected prior to making an offer. This is especially dangerous
because foreclosed homes often have damage or physical defects which may not be
obvious. You run financial risks as well - closing on a foreclosed home can
take many months and the property may have unrecorded mortgages, court
judgments or outstanding tax bills.
Finding Foreclosure Information
Gassett says that he ended up finding current and accurate
foreclosure listings in local newspapers and through Vestlet's website, which
specializes in foreclosure listings in the metropolitan Atlanta area. While using Vestlet's service
in 2007, Gassett signed up again for RealtyTrac's free trial service so that he
could compare the quality of the foreclosure listings. "Vestlet was far more
accurate," he says. Building from a single REO property he bought back in 2005,
over the past 18 months, Gassett says that he has bought eight REO properties in
Georgia
primarily using Vestlet.
Besides using local newspapers and websites specializing in
foreclosure data for a specific metropolitan area or state, another way to find
compilations of foreclosures is to do a web search using the name of a major
city nearby and the word foreclosure. For example, if you're interested in
looking for foreclosed properties near Pittsburgh,
PA, you could search "Pittsburgh PA
foreclosures." You will find plenty of sites with listings in the search
results as well as RealtyTrac and sites like Yahoo Real Estate which also uses
and promotes RealtyTrac. If you find widespread inaccuracies or a critical mass
of listing for the specific geographic area or type of property you're
interested in, then move on to other sites.
Regarding foreclosures, get educated first about the
realities and challenges to researching and buying foreclosures. A foreclosure
purchase should likely not be your first ever real estate purchase. They are
more complicated and risky transactions and should be at least your third or
fourth real estate transaction. For more information, see the latest edition of Real Estate Investing for Dummies.