Mobile - 9 October, 2005 -

Ron Brown and his son, Steven, buy burned-out houses, flooded houses, abandoned houses, and, once in awhile, some "pretty houses." Since Aug. 29, Hurricane Katrina has had their phones ringing, with homeowners wanting to bail from hurricane-ravaged property. "We've been looking at a bunch of flood property -- it's been overwhelming," said Steven, who opened the HomeVestors franchise in Mobile along with his father, last November. Dallas-based HomeVestors of America, whose 250 franchisees buy, renovate and sell single-family houses, is best known as the company behind the "We Buy Ugly Houses" billboard advertising campaign. "Some people don't have flood insurance or very little, and some have insurance but want to be done with it," Steven Brown said. "One lady told me, If I can pay my mortgage off, I'm outta here.' They don't want to be here if another hurricane hits." Buying distressed homes or fixer-uppers for cash is a competitive business, according to Ron Brown. The hurricane season has caused more investors to jump into the market, some eager to fix up a house and rent it to hurricane evacuees, others who want to buy cheap and sell for a profit. Most investors want to buy houses rather than lots or manufactured homes, according to Realtors. "We tell people up front that we are discount buyers," Ron Brown said. HomeVestors pays cash, and the transactions usually take just a couple of weeks, he said. Typically, the purchase price is 65 percent to 70 percent of the appraised value, he said. He also gets an estimate of repair costs and subtracts that before determining what he'll pay. Breaking into the fix-up or rental home market can be a little scary for investors, admitted Charles Hayes of Coldwell Banker Charles Hayes Real Estate. "The more money you pay for (a house), the higher the interest rates and higher the payment," he said. "It won't take you long to get in a hole." It's easier if you have a line of credit and you don't have to pay a lot of closing costs, which can eat up your profit, Hayes said. Often homeowners will borrow on the equity in their existing home to buy investment property, he said. House selling for under $100,000 are the ones most sought by investors, according to Kim Hunter of REMAX Partners. She works with investors who buy and sell homes, and she and her husband buy fixer-uppers as well. Hunter bought a house dam aged in the hurricane, but hasn't found a contractor to repair it, she said. "I've got tenants in houses, and I've got to get their places fixed first," she said. She searches for houses in the Multiple Listing Service and knows which areas to target for less expensive homes. "You can kind of tell the houses that are getting distressed and you watch them," Hunter said. "When they become vacant, sometimes as a result of a divorce, death or abandonment, you buy them." Hayes predicted that hurricane damage will lead to more foreclosures, with those homes landing on the market. "I'm looking at one now where they owe $89,000 and they had no flood insurance," Hayes said. "They have had two or three offers in the $50,000 range. They can't pay off their mortgage with that." "Every home I buy needs something done to it," said John Reeves, the owner of Tri-Star Realty and John Buys Houses. "I pay cash and the closing costs." Reeves, who owns 87 rental homes, said buying waterfront property after a hurricane is not as easy as it was several years ago. "For the most part, the owners of the ones at the west end of Dauphin Island are sitting on them," Reeves said. "The land has gone up so much in value that they sit on them and then sell later." The Browns sell some of their fixer-uppers to investors and friends who want to rehab the houses. "When you buy 30 or 40 houses a month, you can't fix all those in a month, especially with a hurricane and the contractors being so busy," Ron Brown said.

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