Photo Credit: Curbed/Getty Images
At the weekly prison auctions in Brooklyn, decades fly by in a matter of minutes. In the year There is a Dutch Renaissance Revival home in Crown Heights, built in 1889 and owned by the same family for more than half a century. In the year In 1969, the previous owner gave the house to him for $10 and “other valuable consideration”, a deed stating that the house would belong to the couple’s heirs forever. Over the years, the family has taken small loans on the property and paid them back. But something changed around 2007 after the housing market began to open up. The bank loaned $225,745. The family could not pay. Maybe they lost their job or there was a death in the family. Maybe the loan is too big. It happens every now and then.
The bank foreclosed on the home, and the district court rejected the homeowners’ argument that the bank engaged in “predatory lending practices,” allowing the foreclosure to continue. Then the house sat in disrepair for years, until this June, a comical personal-injury attorney stood outside a Brooklyn courthouse as an auctioneer on the moon, saying, “Well, it’s show time!” Until it was a windy day. About 20 people, most of them men and many of them weekly attendees, crammed in. The judge was clearly appreciative of the drama at the time: “Wait a minute” he shouted with a tender shout. “I don’t get paid enough to do this – go slow.” Within two minutes, the house ran for $1.9 million at the perfect minute and went to the short man with the beard. 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; The auctions can feel like a social club for self-proclaimed entrepreneurs, a prelude to what could be the worst event in a person’s life. I asked him what brings people to court week after week. “People come here for opportunity,” he said. “Or out of desperation, he flipped his first house less than 60 days into the game,” said Drew, another regular who moved to New York from Trinidad as a teenager. (An “elder,” a veteran of the market, helped drum up the first money, he said. “How do people lose homes in this market? Does that make sense to you?” But Jonathan looked down at my notebook and regretted it: “People have money problems, or the matriarch. They die. I buy houses from people like that.
A recent report suggests that one in ten homes sold in the United States in the first quarter of 2022 will be successfully flipped, but a windfall can be hard to come by these days: Everything is so expensive, profits are down. As one attendee told me, he’s having a terrible time since the outbreak—there aren’t that many quality homes on the chopping block. But the foreclosure ban is long gone, mortgage delinquencies are on the rise, and some economists are predicting a recession. So people are showing up. Hope is eternal for the momentary seeker.
Each district hosts a weekly auction. In Brooklyn, since the outbreak began on Thursdays, they have been on the steps of the Supreme Court building in downtown Brooklyn. A couple dozen people were there to see what was on offer that morning. No one wants to say their name. Two women chose to go into what they thought would be profitable real estate businesses through LLCs, respectively. “Damn, that was fast,” the owner of Creative Visions said under his breath when a brick duplex on a residential street in Canarsie sold to Fannie Mae for a minimum of $500,000. No one was willing or able to bid higher.
The crowd was mixed, with a mix of wrestlers and side hustlers trying to make some quick cash or get a new side hustle off the ground. Accurate data on house flippers themselves is scarce, but the average profit on a “typical flip” is about $67,000 nationally — the kind of money that might be a drop in the bucket for a large corporation or generational wealthy person, but for the more modestly wealthy and to get there. Good take home for hopefuls.
There were boring guys in loafers and windbreakers looking to expand their Connecticut portfolio to Brooklyn, but it also appealed to people who watched a lot of house-flipping reality TV. The 52-year-old school nurse, who owned her own home in the Bronx, said she has been there every week since the winter, hoping to fix up and sell the property for less than $200,000. She had heard about the auction from a friend and stood by the crowded knot of bidders, leaning against the scaffolding and quietly taking notes.
After spending $535,000, the mixed-use building, managed by three LLCs, including CHILLAX MGMT, is a two-story brick building in East New York with a bright red door and crumbling hinges. The house was purchased in 2006 for $506,500 by an elderly man named Victor.
A few years after the first foreclosure notice, he tried to represent himself as the firm the bank hired had a New York operation with three offices in the state — all focused on quickly recovering money owed to big businesses. Court records show he submitted a series of typed pages describing himself as a “predatory loan victim” and attached a photocopy of the New York brief. Daily news Then-City Attorney General Eric Schneiderman threatened to sue Wells Fargo for breaching the earlier settlement agreement. Victor included a letter that appeared to be from Barack Obama, who encouraged him to “speak with a housing specialist at 1-888-995-HOPE.”
“Even if this court knows that the defendant is unrepresented and may be ignorant of civil procedure and procedure,” the judge replied, “such ignorance cannot be a reasonable excuse.” An investor group that bought the bad debt at auction paid $900,000 for the house, the latest development groups and anonymous LLCs to target single-family homes in East New York.
People in financial trouble without legal representation don’t stand a chance against the bank’s army of lawyers. Like Victor, the owner of the Dutch Renaissance Revival in Crown Heights filed a lawsuit alleging unfair business practices and predatory lending. When she took too long to submit the necessary paperwork, the case was dropped. It’s a mess that can easily be lost.
For people who lose their homes, the foreclosure process can drag on for years. For representatives of major financial institutions and smaller operators in the bidding, however, those final seconds are crucial. In the end, Victor’s house was back in the bank in less than a minute, as were six other properties sold at auction over a two-week period. The dreams of Brooklyn’s self-made real estate investors come true every once in a while, and then the private lenders who hang around the auction house come in with business cards, lending unaffordable renovation loans. The Bronx nurse expects to return every week until she finds what she can afford. She hopes that one day she will find the opportunity to make money. Drew says he made $550,000 in profit on one house; Jonathan, something close to $300,000. But for everyone — the foreclosed homeowners and the entrepreneurial investors and bidders — it looks like it’s going to be tough to beat the bank anyway.
