Oregon’s mediation requirement created “zombie” homes
By Ilene Aleshire
Foreclosure filings climbed 78 percent, to 139, in Lane County in the first quarter of this year compared to the same time in 2013, according to figures from RealtyTrac, a California-based firm that tracks foreclosures nationwide.
John Helmick, CEO of Eugene-based Gorilla Capital, is not surprised by the jump.
Helmick makes his living buying distressed properties, remodeling them, then selling them for a profit. He predicted in January that Oregon would be one of the few states with more foreclosure starts in 2014 than in 2013.
The reason: A change in state law that went into effect last summer requires lenders and homeowners to go through mediation before a home can be foreclosed on.
That change didn’t avoid foreclosure for many distressed homeowners, Helmick said. Those people were so far behind on payments, on houses worth less than they paid, that foreclosure was inevitable, he said.
What it did was create a backlog of homes inevitably headed for foreclosure, he said, many of them “zombie” homes that were in bad shape, abandoned and left to deteriorate further.
A few years ago, about half of the houses his company bought were abandoned, vacant homes, he said; today, about 82 percent are.
The increase in foreclosed homes now being repossessed by lenders or sold at auction isn’t likely to affect the overall Lane County real estate market, Helmick said Tuesday. Those homes are initially in such bad shape that only he and a handful of competitors are interested in them, he said.
“These are houses that are really, really messed up — in general, (they) are not pleasant places to be,” Helmick said. “A lot of houses we are buying right now are very distressed. They don’t look good, they don’t smell good. We put a 25-foot, 30-foot container out front (after buying them) and start filling it with debris.
“I don’t think these are competing against homes that are move-in ready,” he said. “These are not something that someone could easily move into.”
For his company, distressed homes are the raw material that can be remodeled and updated into saleable property. And these houses can compete for buyers, he said, but he doesn’t think the number of homes his company will put up for sale at any one time will have a major effect on the market.
Home sales are affected by a number of factors — “how well the economy is doing, employment, mortgage rates,” he said.
Gorilla’s homes may have a small effect on the market, Helmick said, “but a change in interest rates would have more.”