Foreclosure King: Best Thing for Distressed Neighborhoods Is Homeowners

When "Nightline" first met Odell Barnes, the man known to some as the Foreclosure King, he was on his cell phone constantly, buying foreclosed homes by the dozens from his front porch in South Carolina.

A year later, he's still answering the phone, but he's off his porch and in Detroit.

"It's too big for me," he said of the current housing crisis. "One thousand houses a week? It outgrows you."

Sitting on another front porch -- this time at a burned-out house in Detroit -- Barnes has plunged face first into the nation's housing crisis. He's always bought houses in bulk from banks, but what's changed is that, in the last year, mortgage insurer Fannie Mae has begun dumping foreclosed houses on him. The original owners are gone and Fannie Mae and the banks can't sell any other way.

Odell Barnes

What's also changed is the volume and locations of the houses he sees all across the country .

"I've always had Detroits, the inner-city houses, but not the Wisconsins, not the Maines," he said. "I'm buying in Maine, I'm buying in Delaware." He also mentions California and Nevada, states where he says he'd never had houses.

"I don't think there is a state I don't buy in anymore," he said.

Detroit has been particularly hard hit. Barnes said that if he buys a package of 100 houses, 10 percent of them may be tear-downs or have serious problems, like fire damage. There are also many livable homes, just waiting for a little TLC.

But in this part of the country, where dying industries have exacerbated the foreclosure problem, there were so many foreclosures being dumped that Barnes couldn't handle all the sales from his front porch. He's opened an office here and brought in partners, like local entrepreneur Abner McWhorter.

"The last thing I think we want with these homes is that they get in the hands of landlords who try to, if nothing else, rent them or mothball 'em, [and] if the market turns around, to cash out," McWhorter said. "We really don't need that as a community right now. I'm glad that we teamed up and we're doing pretty good."

With hundreds of houses sitting empty, in danger of falling apart or being stripped of anything salable, Michigan and Detroit have become ground zero in the nation's housing crisis. But now it's not just the inner cities -- houses in middle-class suburbs are being hit.

"Two years ago, you bought 100, 200 houses a month, now you buy 2,000 to 3,000 houses a month and it's going to be more," Barnes said. "They don't know what to do with them, the mortgage companies, and they're just dumping them."

The problem is that nice houses can easily be turned into bad ones. And one vacant, neglected house can quickly destroy a block, that block can bring down the neighborhood, and so on.

To Barnes, the solution is simple -- get people into houses. Barnes does that by buying packages of houses from lenders, then selling in smaller packages to investors. Either he or his investors then find out the going rate for rent in the neighborhood and offer to sell the house for slightly less than that.

The day "Nightline" stopped by Barnes' and McWhorter's shared office in Detroit, Edward Moody was closing on his second house, on the same block as his first. He fixed up the house he's living in now and plans major repairs on the one he just picked up.

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