Photo-Illustration: Curbed/Getty Images
At Brooklyn’s weekly foreclosure auctions, decades are undone in minutes. There is a house in Crown Heights, a Dutch revival built in 1889 and owned by the same family for over half a century. In 1969, the previous owner sold it for $10 and “other valuable consideration,” the paperwork stating that the house would belong to the couple’s heirs forever. Over the years, the family took out small loans on the property and paid them off. But something changed around 2007, once the housing market began to fall apart. The bank loaned $225,745. The family could not pay. Maybe they lost their job or had a death in the family. Maybe the loan was just too big. It happens all the time.
The bank put a lien on the house and a district court dismissed a challenge from the owners alleging the bank engaged in “predatory lending practices”, allowing the foreclosure to continue. Then the house sat in limbo for years, until one blustery day in June when a personal injury lawyer, moonlighting as an auction arbiter, turned up. stood outside a Brooklyn courthouse and said, “Okay, it’s show time!” About 20 people, mostly men and many of them weekly attendees, crowded around. The referee had a clear appreciation of the drama of the moment: “Wait a fucking minute,” he shouted in a flurry of offers. “I don’t get paid enough to do this – take it easy.” Within two minutes, the house went to a short man with a beard who ran at the absolute last minute, for $1.9 million. A few people groaned. “He’s my friend,” Drew, a Jamaican immigrant who’s been flipping houses since 2013, told me with a smile.
Drew has many friends; auctions can feel as much like a social club for self-identified entrepreneurs as a playground for what could be the worst event in a person’s life. I asked him what brings people to the courthouse week after week. “People come here to seize the opportunity,” he said. “Or out of desperation,” retorted Jonathan, another regular who arrived in New York from Trinidad as a teenager and says he knocked down his first house in less than 60 days after getting into the game. ( An “older guy,” a market veteran, helped him raise the initial money, he said.) Jonathan didn’t have much sympathy for the losers in the trade. “How do people lose houses in this market? Does this make sense to you? But Drew, glancing at my notebook, was more contrite: “People are in financial trouble,” he said, “or the matriarch dies.” I buy houses from people like that.
According to a recent report, one in ten homes sold in the United States in the first quarter of 2022 had been successfully flipped, but a bargain can be hard to find these days: everything is more expensive, profits are down. As one attendee told me, he’s had a terrible time during the pandemic — there just aren’t that many high-quality homes on the chopping block. But the moratorium on foreclosures is long over, mortgage defaults are on a temporary climb, and some economists are predicting a recession. So people keep showing up. Hope is eternal for the little hustler.
Each borough organizes a weekly auction. In Brooklyn, since the start of the pandemic, they have performed on Thursdays on the steps of the Supreme Court building, a filthy staircase shaded by scaffolding in downtown Brooklyn. A few dozen people are present to see what is on offer that morning; no one wants to say his name. Two women preferred to go through the limited liability companies they had recently formed for what they hoped would become lucrative real estate ventures: Creative Visions and Sparks of Shine, respectively. “Damn, that was fast,” the Creative Visions owner gasped when a brick duplex on a residential street in Canarsie was sold back to Fannie Mae for the minimum bid of $500,000. No one wanted or could bid higher.
The crowd was mixed, a collection of more traditional costumes alongside wrestlers and side predators trying to make a quick buck or get a new side off the ground. There is a dearth of definitive data on home pinball machines themselves, but average profits on a “typical pinball” hover around $67,000 nationwide — the kind of money that might be a drop in the bucket for a big corporation or someone with generational wealth, but a nice return for the more modestly wealthy and people hoping to make it there.
There were, of course, bored men in loafers and windbreakers looking to stretch their wallets from Connecticut to Brooklyn, but it’s also an enticing venture for people who have watched a lot of home reality TV. A 52-year-old school nurse who owned her own home in the Bronx said she had been there every week since the winter, hoping for a property under $200,000 that she could fix up and sell. She had heard about the auction from a friend and stood next to the rowdy knots of bidders, leaning against the scaffolding and quietly taking notes.
After a mixed-use building run by a trio of LLCs, including one called CHILLAX MGMT, cost $535,000, a two-story brick building in East New York with a bright red door and a ruined porch appeared. The house had been purchased in 2006 for $506,500 by an elderly veteran named Victor.
A few years after the first foreclosure notice, he had tried to represent himself against a company hired by the bank, a New York operation with three offices across the state – all of which specialize in quickly collecting funds owed to large corporations. Court records showed he filed a series of typed pages describing himself as a ‘predator loan victim’ and attached a photocopy of a New York court Daily News article in which City Attorney General Eric Schneiderman threatened to sue Wells Fargo for breaching an earlier settlement agreement. Victor also included what appears to be a form letter from Barack Obama, who encouraged him to “speak with a housing specialist at 1-888-995-HOPE.”
“While this court recognizes that the defendant is unrepresented and may not be familiar with civil practice and procedure,” the judge replied, “nor can such ignorance constitute a reasonable excuse.” At the auction, a group of investors who had bought his bad debt paid $900,000 for his house, the latest example of development groups and limited liability companies growing targeting family homes in eastern New York.
People without legal representation who are going through financial hardship don’t stand a chance against armies of bank-hired lawyers. Like Victor, the owner of Dutch Renaissance Revival in Crown Heights filed a dispute alleging unfair business practices and predatory lending; the case was dismissed when she took too long to file the necessary documents. It is a maze in which it is easy to get lost.
For people who lose their homes, the foreclosure process can take years. For representatives of large financial institutions and smaller auctioneers, however, it is those last seconds that count. In the end, Victor’s house returned to the bank in less than a minute, as did six other properties I’ve seen auctioned in two weeks. Brooklyn’s self-made real estate investors only saw their dreams come true once in a while, then private lenders hanging out at auctions rushed in with business cards offering them loans for renovations they might not be able to afford. allow. The Bronx nurse expected to come back every week until she found something she could handle. One day, she hoped, she would find an opportunity to make money. Drew said he made a profit of $550,000 on one of his homes; Jonathan, something closer to $300,000. But for everyone – foreclosed owners and enterprising investors and bidders – it seemed awfully difficult, in any scenario, to beat the bank.