Home tour by trolley

Lucy Lewand peered out the window of Rosie the Trolley, sizing up the empty house on a Windsor cul-de-sac.

She had seen six houses so far, with five more to go on her tour through the clearance aisle of Sonoma County's real estate market.

Lewand had 10 minutes to walk through the home, which was seized by the bank four months ago after its owners stopped paying their mortgage. Then she climbed back on the trolley with a dozen other bargain hunters and headed to the next stop, another empty house with a similar story.

"This is a good opportunity to see a lot," said Lewand, a first-time home buyer from Healdsburg.

And there is a lot to see.

Every week in Sonoma County, banks take back 60 homes from owners who have fallen behind on their loan payments.

Sensing an opportunity in an otherwise slow market, real estate agents and mortgage brokers are organizing tours to showcase foreclosure properties to potential buyers. Almost every weekend this summer, buses carrying first-time buyers and investors roll through neighborhoods across the county to pick through the wreckage left by the mortgage meltdown.

Most foreclosure properties can be bought for less than $400,000 -- sometimes much less.

"That's where the action is, that's what's selling," said Karen Mountain, a mortgage broker who organized last week's foreclosure tour.

Buyers are finding prices that haven't been seen in the county in five years. The median home price has tumbled 35 percent since its peak in 2005, hitting $404,500 in June.

The dive accelerated this year as a flood of foreclosures hit the market, triggering a dramatic shift in the mix of sales in Sonoma County.

While other segments of the county's real estate market remain mired in their worst slump in more than two decades, sales of homes priced under $400,000 have jumped sharply over the past three months. Buyers snapped up 500 homes in this category during the second quarter, up from 85 during the same period a year ago.

The vast majority -- more than three out of four homes in this segment -- are being sold by banks trying to dump properties they've repossessed or by owners desperate to avoid foreclosure.

"Almost everything I look at these days is a foreclosure. I'm surprised when it isn't," said Pete Deatherage, co-owner of Pacific Appraisals in Rohnert Park.

Typically selling for more than 35 percent under what they fetched when the housing boom peaked, these homes are opportunities for buyers once priced out of the market and for investors who can rent them for about the cost of a monthly mortgage payment.

Bidding battles are not uncommon. While higher-priced homes often linger on the market for months without drawing a serious buyer, bank-owned homes typically attract multiple offers and sell above their listed price.

"I can never remember the market dropping as much as it's dropped and this many people rushing in to buy in this short time frame," said James Madison, a foreclosure specialist at Coldwell Banker with three decades in real estate.

Most buyers in the foreclosure market are looking for a place to live, said Madison, who is marketing about a third of the bank-owned homes in the county.

Richard and Teja Faria paid $330,000 in the same Santa Rosa neighborhood where they sold a similar home for $590,000 three years ago -- a 44 percent difference.

"It's scary because it's a declining market. But we want to buy because we want an affordable mortgage payment," he said. "The timing is perfect."

The couple recently returned to Sonoma County to raise their two children after Faria, a Coast Guard cooking instructor, took a post at the Coast Guard Training Center in Two Rock.

Driving the county with his agent for several weeks, Faria found plenty of foreclosed homes, but twice came up short with purchase offers.

"We were frustrated," he said. "But we took a shot and like everybody else in today's market, that's what you have to do."

Not wanting to miss out again, Faria offered $12,000 above the bank's price for the 1,700-square-foot home in southwest Santa Rosa. The deal should close within a month.

If not for the drop in prices, the Farias would be looking to rent an apartment. Their gain is possible because of another family's loss.

"I have two minds about that. I feel sad for the people. They had lives here," he said. "But we love the area."

Once a tiny niche in the real estate market, distressed properties are now a major focus for real estate agents and mortgage brokers.

"This thing is so massive that everybody is getting into the act. There's enough to go around," said Madison, who manages 270 bank-owned listings with a staff of 17 workers.

Foreclosure tours are one of the newest strategies used to introduce potential buyers to the market for distressed homes.

Teams of real estate agents and mortgage brokers have rented buses -- and the trolley -- to ferry groups of buyers on local foreclosure tours on five of the past seven weekends.

To get a seat on the bus, buyers must be prequalified by lenders and show a serious interest in making a purchase. Although no deals are made during these tours, buyers may return with an offer or look for other homes with the agents.

"This is a lead generator. They may not see something on the tour that they want, but we have started to establish a relationship," said Joel Schumer, chief executive for Cashback Home and Loans. "What we're trying to do is survive this market."

Last week, Mountain and real estate agent Diana Blakeley rented Rosie the Trolley from the city of Santa Rosa. They thought the bright red trolley was a novel way to encourage buyers to sign up for their foreclosure tour, said Mountain, a broker with First Priority Financial.

"Buying a house is a big event, and some people feel nervous about buying foreclosure properties. We want them to feel comfortable," she said.

Passers-by looked in bewilderment at the group on the motorized cable car as it rolled through the Windsor neighborhood. Passengers sipped sodas and ate cookies, making notes and sharing observations as they headed for another stop.

The mood was festive, with the driver ringing Rosie's bell and passengers waving to residents doing yard work and talking with neighbors.

Still, some buyers had mixed feelings about bargain shopping. Losing a home in foreclosure can be a devastating setback for one family, but it creates a chance for another.

"It really is sad. But it's also an opportunity for other people," said Stan Quaranta, a buyer on the tour.

Tosh Lu took the tour to aid his search for investment property.

"In one tour you get many neighborhoods. This saves a lot of time," said the Rohnert Park resident. "I'm going to buy before the market goes back up again."

On board were a few investors, but mostly people looking for homes in which to live. Blakeley and Mountain answered questions about the conditions of homes, price histories, and financing options.

The nearly four-hour tour stopped in Santa Rosa and Windsor. The homes were in mostly good condition once buyers looked past brown lawns and dying plants -- a telltale sign of foreclosure in many neighborhoods.

Prices ranged from $250,000 to $449,000.

The first two homes, in west Santa Rosa, didn't generate much chatter. The third one, in northwest Santa Rosa, was more promising because it was newer and featured a granny unit.

"That's definitely a possibility," said Gary Everson, a 19-year-old looking with his mom.

Now a renter, Everson figures he can buy a house and make the mortgage payment with help from roommates.

"Before, I didn't think I was ever going to be able to buy a house, not until I saw these prices," he said.

Two other houses in northwest Santa Rosa elicited favorable comments about the prices relative to their size.

Buyers were less impressed with the first Windsor home, which had a musty smell. The next Windsor house had dirty carpets and a child's crayon scrawl on a bedroom wall.

The next two were in good shape but the priciest on the tour, placing them out of range for some of the buyers.

"It's still a stretch," said Lu.

During the last two stops, buyers seemed to have made up their minds on which homes, if any, they would consider making an offer.

Several homes would draw a second look from Lewand, the first-time buyer from Healdsburg.

"This tour is kind of making me get a little more serious," she said.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.