Climb Aboard the Bus!

Dec. 21, 2007— -- With home foreclosures on the rise, one man is making the best out of a bad situation.

Cesar Dias, who has been in real estate 18 years, is making sure that the foreclosed houses in his hometown of Stockton, Calif. are getting sold, in a quite unusual way.

Dias leads the weekly "Repo Home Tour," where he fills two large, brightly colored buses with prospective buyers looking for houses with big price reductions. There is almost an art to the way he makes the home-buying experience fun.

He tempts prospective homebuyers with sweets and good cheer as if the whole thing's a party, then loads the whole crowd onto a couple of buses as if they're all going on break.

But if you ask Cesar Dias why he conjured up Repo HomeTours three months ago he'll tell you it's not about money, or profits, or exploiting the misfortune of others, but about saving neighborhoods in Stockton.

Many of the foreclosed properties are in still thriving communities, where the homes are dressed up for Christmas, and where the ice cream truck still rolls through, but where the occasional homeowner got in too deep and lost it all. Dias believes he is providing a necessary service.

"We have an abundance of properties," said Dias. "And banks have to sell, and we have to provide buyers."

With this simple logic, Dias believes he is saving homes. And many of the homes in Stockton need all the saving they can get. This was a town that was born in the California Gold Rush, and over time has experienced the all too typical real estate boom -to-bust.

There was a housing construction boom partly fed by people who could not afford the expensive houses in San Francisco, 60 miles away. As more and more homes were being built, prices went down and homebuyers were finding homes they could afford, or so they thought.

Many homebuyers simply bought to turn a profit; heedless to the bust that would inevitably come as homeowners could no longer afford their mortgage payments.

According to RealtyTrac, a group that monitors real estate, Stockton had the highest rate of foreclosures of any metropolitan area in the nation between last July and September.

Foreclosures Good News for Some

If there is good news for anyone in that statistic, it would be for people like Elissa and Jon Hernandez, who were on Dias's tour this week. The Hernandez's have been renting for years but believe they can finally afford to own a home, thanks to the decreased prices of the foreclosed homes in Stockton.

In fact, one of the houses displayed on the tour was a two-story, 2,600-square-foot house that was purchased for $504,000, but now the bank that owns it is only asking $285,000. Hearing about these price drops is part of the thrill of the tour. Participants have a sense that they might just get lucky and have a home drop right into their laps.

It happened for Daniel and Debbi Noel. They had been living in a one-bedroom rental with air mattresses in the living room since their boys were little kids. Now all four were on the tour, just to celebrate how great shopping foreclosures can be.

It was made even better because Dias threw them a party for their first day in their new house, the first that couple has ever owned. The Noels were thrilled to get the house—apparently a lot of people were looking to buy it.

"We settled on the home for $185,000. It was on the market for $179,000," said Daniel Noel.

With all of the joy at getting a new home, sometimes it's easy to forget about the poor previous owner who lost the home. "It hadn't crossed my mind," Daniel Noel said of the previous owner's loss. "I look at it as more or less an opportunity."

The Hernandez's see it as an opportunity as well and refuse to apologize for buying a foreclosed home. "We get ourselves into positions and if we can't get ourselves out, it's our responsibility to do what we have to do," said Jon Hernandez.

Daniel Noel's wife could put herself in the place of the old homeowners. "If it was us and we were in whoever's shoes who had this house, yeah I feel for them."

Cesar Dias does feel for the old homeowners as well, but believes it is all part of the business. "In every business there's casualties and there's an influx of new buyers."

A Vicious Cycle?

The homes that families like the Hernandez's and the Noels are snatching up are empty, because their previous owners took on mortgages that were too big for them, or became too big when their adjustable interest rate ticked upward. The assumption has to be that this crop of buyers will not repeat those mistakes but there are no guarantees that the new owners won't fall into the same trap.

The Noels themselves took on a hefty mortgage. They paid with no money down and therefore borrowed the entire value of the house at 7 percent interest. While it's a lot, Daniel Noel believes they can handle it.

"It's a 30-year fixed, $1,600 a month, which is good at 100 percent financing," Daniel Noel said of the home.

The Hernandez's have not committed yet to buying, but it seems like they still have a few things to learn about mortgages. When asked if they were planning to get an adjustable or fixed mortgage, Jon Hernandez admitted that "I personally don't know the difference."

Even if you can handle and understand the mortgage, getting a foreclosed house is not necessarily getting a bargain. It doesn't really matter what the last guy paid for it. What matters is what the next guy will pay -- and no one really knows if prices are done dropping yet.

Buying now takes an optimist. People like John Escove, who was along on the ride, looking for investment properties.

"When you see a house like the one we saw with the swimming pool for $225,000, that's going to sell right away," said Escove. "And they'll have multiple offers on it. That's just a bargain."

And while the foreclosure tourists are certainly happy to be shopping for a bargain, one wonders what the neighbors think of the colorful road show home-buying circus. It doesn't bother Stockton resident Don Bailey.

"I don't care who sells it, you know, just sell it," said Bailey.

It's an answer that could have been scripted by Cesar Dias. No one likes an empty house. But in Stockton there are lots of them, and they're on the tour.