Real Estate

Banks are knocking on North Fork doors

BARBARAELLEN KOCH PHOTO This Rolling Woods, Riverhead, house in foreclosure was scheduled to be sold on the steps of Town Hall last Friday. The auction was canceled and the house still has not been sold.

Announcements of foreclosure sales for properties in Riverhead have peppered the legal notices in recent weeks, and although Southold’s foreclosed properties are comparatively few and far between, the statistics on people here who are behind on their mortgages and in danger of losing their homes are staggering.
As of last week, 208 people in Southold Town and 430 people in Riverhead were at least 30 days behind on their mortgages, according to Kristopher Pilles, owner of East End REOs, which specializes in distressed real estate. He says that these figures make him worry that foreclosures will soon be on the rise, even in areas like Southold, which once seemed immune to foreclosure.
“That’s a huge number,” said Mr. Pilles. “I’m just hammered. The North Fork has fared better than the Hamptons but it looks like it’s going to be catching up this winter.”
He estimated that, in a healthy market, only 15 to 20 percent of that number of people in both towns would be behind on their mortgages. Though 30 days behind is a very early stage — before default or foreclosure — mortgages in that condition, known as lis pendens, are the best available statistical indicator of the foreclosure market.
The Multiple Listing Service shows nine houses in foreclosure this week in Flanders, but only one in Riverhead and none on the North Fork. Bank-owned properties do not always appear on MLS, depending on the bank’s strategy for selling the property. The outstanding mortgages on the Flanders properties listed on MLS range from $292,500 to $600,000, well above the bottom end of asking prices in Flanders, where the lowest priced house this week was a two bedroom, one bath for $90,000, less than the loan on it was worth.
“People had a lot of expectations that didn’t pan out” in Flanders and Riverside, said Mr. Pilles. “The value was not what people expected. The whole region was driven by greed and ignorance.”
In Southold, a four-bedroom historic house in foreclosure on the Main Road was initially listed for $247,000 and sold for $220,000 earlier this month, an indicator that even banks are testing the market’s floor.
Kathy Rosenbaum of Lloyd’s Realty in Greenport, which sold the Southold house, said this week that price reductions on foreclosures are not uncommon.
“If they’re getting appraisals from someone who’s not from the area, they could tend to price them higher” than is realistic, Ms. Rosenbaum said. “Sometimes they want to see what they can get” for the property.
She pointed out one example — a three bedroom, two bath foreclosed property on Meday Avenue in Mattituck — that initially listed in May at $319,000 and is now offered at $269,000. Another property, next door to the Blue Dolphin Resort in East Marion, was listed in foreclosure at $450,000 earlier this year and has since been reduced to $362,000, with with no takers yet, she said.
“It will be coming back on the market with a different broker,” she said. “That’s an example of an out-of-the-area broker.”
Mr. Pilles said The Blue Dolphin itself is bank-owned, and several buildings surrounding the motel that are owned by the same company but were financed with different banks are in various stages of foreclosure. He said he sees numerous reports that show commercial properties on the North Fork with owners who are falling farther and farther behind on their mortgages.
“There are some really big assets in Greenport, Cutchogue and Mattituck,” he said, adding that many business owners have been operating on equity lines of credit and will soon be unable to pay their bills.
“If you look at the fact that some people owe $3 million on something they paid half a million dollars for, that explains the situation,” he said.
Though buyers historically needed to pay cash for foreclosures, banks have been willing to finance them in recent years.
“People are looking for what’s cheap,” said Ms. Rosenbaum. “A lot of people don’t understand the process. They need more education on how it works. It’s easier if you have the cash but the banks will also lend money out. It depends on the condition of the property. If the house has been trashed, it may be more difficult to finance.”
“The long-term stability of the region is great,” said Mr. Pilles. “We’ve got to get values back in check. On the North Fork, once properties hit the $300,000 price range, they sell quickly. That’s a really good underlying value of real estate here. It’s a great buying opportunity. In areas in Riverhead, there are a lot of people who rent who could easily afford to own. It’s a matter of knowing that buying a house is possible.”
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