Some entrepreneurs find opportunity in foreclosure meltdown

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South Florida’s housing boom cratered fast and, like the epicenter of an earthquake, left a trail of destruction in its wake.

But in the aftershocks of plummeting home prices, unemployment and continuing foreclosures, some professionals and entrepreneurs have found ways to make money amid the ruins.

Jeff Waters, of Giving Tree Development of Fort Lauderdale, Fla., considers himself a “white angel” for buying notes at deeply discounted rates and then lowering borrowers’ monthly mortgages to help save their homes.

Others, like Peter Zalewski, of CondoVultures of Bal Harbor, Fla., have no qualms about capitalizing on the misfortunes of others by gobbling up bargains to make big bucks.

“It’s not noble, but it’s definitely profitable,” Zalewski said.

The opportunities that have arisen from one of the biggest housing meltdowns in South Florida history are expected to continue for the next year or two with new foreclosure filings swamping the courts with no end in sight.

“Those who never came to grips with the historic bust are improving their golf games or catching a lot of fish,” said Jack McCabe, a real-estate analyst. “Those who had the foresight to shift gears for the tumultuous marketplace have found opportunities to start and grow businesses. Some are going to make fortunes.”

Former business journalist Zalewski founded his foreclosure specialty real estate and consulting firm in March 2006 ? a few months before the start of the housing crash he predicted would come.

Over the past three years Zalewski said he has hired 36 agents to keep up with the demand from cash investors looking for bargains. His business, with its provocative name, caught the eye of filmmaker Michael Moore while he was working on his new documentary, “Capitalism: A Love Story.”

Zalewski is featured in the documentary and its trailer, which shows foreclosure signs in front of residential homes. It cuts to the well-groomed entrepreneur sitting at his desk. As he makes his hands look like he’s firing a gun, Zalewski says: “This is straight up capitalism. Chi-Chi-Boom.”

Waters helped found Giving Tree Development last year out of necessity. He was a casualty of the bankruptcy of global investment bank and brokerage firm Bear Stearns.

He soon found it possible to buy up distressed mortgages?as few as one at a time, rather than purchasing them in large pools of 200 houses or more.

The process works like this: A company or its investors purchase a note, then the homeowners get a knock on their door and are given the news about the change of their loan servicer and offered a modification.

“It’s not every day a white angel knocks on the door wearing a T-shirt and shorts and wants to reduce your mortgage payment,” Waters said. “They are in disbelief.”

Because the notes are bought at deep discounts, Waters’ company is able to make a profit by making the mortgage affordable now and then refinancing the home years later when the housing market recovers.

“It’s gratifying to make a living helping people who are really down and out,” Waters said.

Foreclosures also have been good business for Ken Arnold. In December 2006, he founded Miami-based Association Financial Services, a finance company for condo and homeowner associations, just as the foreclosure crisis began.

He soon started offering advances to cash-strapped associations, enabling them to move forward with foreclosures on homes and units where owners were no longer paying association dues or their mortgages.

“I don’t want to say it was good luck,” Arnold said. “But we were in the right place at the right time when things began to fall apart.”

Other businesses have adapted, McCabe said:

?Some law firms that previously had large real estate transaction departments have converted to large real estate litigation departments, which are now handling the flood of foreclosure cases swamping South Florida courts.

?Some developers have gone from being the principals in building condos to contractors who complete unfinished products for banks that have taken over properties.

?Instead of working on new units, some interior design firms now provide packages to furnish foreclosed condos that developers and lenders can rent out.

John Tur’s School of Creative Real Estate has taken off during the housing meltdown. Enrollment in his seminars has zoomed from about five students a month to 50, he said.

Enrollment also has soared in his “Millionaire Mind” class that teaches people self-discipline, how to stop procrastinating and how to be more productive.

“For me, the foreclosure crisis has helped my business,” Tur said. “I’m in the business of helping people solve problems, and right now more people than ever have problems.”

David Southwell’s Creative Asset Protection Strategies also has embraced the foreclosure crisis. The certified public accountant helps those who have gone through foreclosures “sort out how to avoid taxes.”

He also helps clients plan for the possibility of a future deficiency judgment, a lien against a borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full.

“Banks have five years to file a deficiency judgment,” Southwell said. “And once the banks get through all the foreclosure mess, they may go back and try to collect the deficiency. Residential mortgages rarely are without recourse.”

Marshall Kaplan’s Green Thumb Lawn Service has grown like weeds during the housing crisis. He said his crews have gone from maintaining lawns at 40 to 60 foreclosures a week a year ago to 250 to 300 a week now. “It’s a lot more high end now,” he said. “We see a lot of gated houses in Coral Gables and houses on the bay.”

Some companies that adapted to the foreclosure crisis are finding it necessary to alter their strategies once again.

“Business is not booming anymore,” said Scot Barton, who in mid 2008 revamped his home-sitting business into a company that rehabs foreclosures for banks and real estate agents.

He hired seven employees to clean pools, remove trash, maintain lawns and make repairs. Now he’s down to two part-time employees.

“Things changed. Now the banks aren’t worried about the grass, the pool, showing the house in order,” Barton said. “They are so upside-down on the house, and because they are not going to make their money back, they don’t want to put more money into it. All the REOs (lender-owned properties) are being sold as is.”

The Broward Real Estate Investors Association, which provides education and networking for investors and real estate professionals, was launched in 2002 when home prices were appreciating nicely. Now co-owner Jan Leon said instruction has been adjusted to the rapidly changing market, with emphasis now on how to make money on foreclosures. In a half mile radius between Riverland Road and Broward Boulevard in Fort Lauderdale, she said, there were 211 addresses of properties that were delinquent or in foreclosure.

“The state has come up with all kinds of new rules and regulations of what you can and can’t do,” Leon said. “We teach how to keep yourself out of trouble, and avoid the pitfalls a lot of people have fallen into.”


(c) 2009, The Miami Herald. Source: McClatchy-Tribune Information Services.