Time to Buy? Don't Miss the Boat, or the Bottom

Bargain hunters in Florida are trying not to miss the boat-- or the bottom.

March 18, 2009, 10:36 AM

CAPE CORAL, Fla., March 19, 2009— -- In their search for fire-sale prices on foreclosed homes, one group of buyers doesn't want to miss the boat. Literally.

In a novel piece of marketing, a real estate company in this foreclosure-saturated community, which is criss-crossed with canals and waterways, has created an effective way to lure customers.

The Foreclosure Boat Tour is now a regular sales event for a Cape Coral, Fla., company that calls itself Foreclosures 'R Us -- like Toys 'R Us, but this is no game. Company owner Marc Joseph knows that this is serious business.

"I'm telling you, it's location, it's timing -- the time is now, because banks are competing against each other -- and it's price," said Joseph as he stood at the bow of a boat carving its way through the waters of a canal here as a dozen prospective buyers shielded themselves from the sun and listened intently. "You're buying it below what it takes to produce it for."

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Joseph has been in real estate in the area for almost 20 years. It was exactly a year ago -- after the bubble burst -- that he reinvented his agency, selling only foreclosed properties. His pitch: The time to buy is fast approaching.

There is one question every buyer wants answered and Joseph anticipates it.

"Are we close enough to the bottom is the million-dollar question," Joseph said. "And I say yes. I say in six or eight months, if you are not here you may miss the absolute bottom. But you are close enough that you should be looking and taking advantage of the market. Am I telling you to buy now? Absolutely."

Cape Coral is a sleepy town of 160,000 people. Residents like to boast that the 400 miles of waterways carved out of Florida's Gulf Coast in the 1950s give Cape Coral more canals than Venice, Italy.

But today the town also holds a more dubious distinction: With 34,000 homes in foreclosure or facing foreclosure, Lee County -- which includes Cape Coral -- has been dubbed the foreclosure capital of America.

There were just four stops on the boat tour the morning "Nightline" went along, all, of course, waterside homes with direct access to the Gulf of Mexico.

'This Is the Time to Move'

Arriving at the first home on the tour, Joseph ran through statistics.

"This home has a total of 1,988 square feet of living [space] and just under 1,000-square-foot lot," he said.

But the numbers that really tell the story are the prices: In January 2006, the house sold for $725,000. Now it was listed at $279,900 -- a staggering 61 percent drop, and that's just the asking price.

Chris and Annie Loepker operate a big corn farm in Illinois, and with their daughter Jessica they are looking for a winter home in the Florida sunshine, if the price is right.

"Waterfront is what we were looking for, mainly," Annie Loepker said. "Waterfront, because we do boating."

She said they plan to live in the house during the winter months, "and then sell it five years from now when the market's back."

The Loepkers plan to pay all cash, which is a good thing, because if you don't have cash in this market, good luck getting a mortgage without a good down payment, a secure job and a great credit rating.

As the boat wound its way through the canals to the next foreclosed home, Joseph filled the time with a little education. He held a chart and showed the prospective buyers that homes sales in Cape Coral right now are rivaling the peak of the market in 2005, but, he added, they're selling at prices "50 percent" lower than they did four years ago.

It's no accident that homes got fancier as the tour continued. The Foreclosure Boat stopped at house listed for a cool $574,000 -- it had been listed for $800,000.

Chris Loepker said he liked the house's "vibe."

"I like the way it's built; I like the rooms; I like the square footage," he said, but he wasn't sure if he would bid on the home.

"I'd start with $350,000 and see what happens," he said.

When asked if he was playing tough, he replied, "You have to. Someone's going to get it, so it may as well be me."

Joy Norton, originally from Boston, now lives in Bonita Springs, not far from Cape Coral. She said the homes on this tour were a bit pricey for her pocket book, but she and her husband think it's time to buy.

"No waiting," Joy said without hesitating. "I've seen this go through back in '82 or something. We sat and we wanted to buy, but we didn't because we were afraid. I think you live and learn. This is the time to move."

Deep Discounts Available

It's not surprising that the fancier homes are on the water. But what drove the boom here and what's really dragged down prices are the more modest homes on dry land.

Joseph took "Nightline" from his Foreclosure Boat to his Foreclosure Bus -- which runs regular tours through Cape Coral each week -- to show us just how low prices can go

The bus stopped in front of tidy little 1,400-square-foot house built in 2001.

"The previous selling price on this house back in February of 2006 was $256,000," Joseph said.

It had just gone on the market for $54,900. And it sold in four days.

That's a staggering 80 percent discount from the peak of the market.

Joseph said some banks are simply determined to clear their books, so they are pricing repossessed homes very aggressively. And when they do, the houses sell quickly.

Back on the canals of Cape Coral there was one more home left on the tour.

One 3,000-square-foot house that had previously sold for $1.1 million is now listed at $664,000. But even with its prime lot it is going to be a hard sell: The roof is collapsing, there is mold under the eaves and there are a lot of decorative touches -- roman columns, wall paintings of Venice -- that will need a very special buyer.

Chris Loepker looked around and winced. The house was "really nice for somebody -- too much house for me," he said. "It's too much. I'm not just talking about the size. How do I say this -- it's not that I don't have class. It's just that it's too fancy."

Speculators Still Dominate Market

There's no question it is a buyer's market. It can't even begin to recover until the massive inventory of unsold and abandoned homes is absorbed, and optimistically that is going to take at least two years. But for all his optimism, Joseph has one nagging concern: The market that was destroyed by speculators is once again being dominated by them.

"They are two-thirds of the market, like they were before," he said. "I wish I could tell you it was another story, but it's not. This is the story. ... They are looking at this as an opportunity.

"Do I think there is something wrong with that? Yes. But can I change that? No. That is the open market," he said. "Open market is put the product out there and see who buys it."

Which means buyers better have a strong stomach, because there could be stormy seas ahead.

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