Joe Nee of Chandler knows what it's like to stand on the brink of foreclosure.
Six years ago, he fell behind on his mortgage payments after getting laid off from a job as a construction superintendent in Las Vegas. Nee put his house on the market in desperation and sold it a week before he would have foreclosed.
"It's not hard to fall into," he said. "I was really embarrassed about it."
That experience propelled him to move to Arizona and start Flatland Investments, which operates www.soezhomebuyer.com and www.soezhomeseller.com. He scoops up houses from people who need to sell in a hurry, and says he gives them about 85 percent of the market value. More and more, those customers are selling to avoid foreclosure. They are as many as five months behind on their mortgage payments, their houses are usually in disrepair and they are weeks if not days away from losing the property.
"Unfortunately, my most common customer is people behind on payments," Nee said. "They don't want to believe it or look at it and then they come to me at the last minute. I do charge money to drop everything and go put out that fire."
Recently, Nee said he bought a home for $155,000 that was appraised at $170,000. He made repairs and sold it for $177,000.
Nee said his fees are comparable to what people pay to sell their house through a real estate agent, considering the cost of repairs, inspections and commissions. He said he takes care of back-payments and fixes up the house. That can range from $500 for paint and decorations to $10,000 for remodeling, depending on the house's condition. In this market, he is quickly flipping the properties for profit.
Around the southeast Valley, foreclosure rates have dropped sharply. In Gilbert, foreclosures dropped 40 percent from 2003 to 2004, and in Higley, foreclosures dropped 25 percent during the same period, according to Infocom, a Phoenix-based real estate data company that compiled the data for The Republic. In Chandler, Tempe and Mesa, foreclosure rates dropped at least 15 percent during that period.
The rush of people around the Valley seeking to buy real estate has led to the drop in foreclosure rates, says Jeff Young, senior vice president of First Financial Equity Corp., a Scottsdale-based financial planning firm.
And in such a market, foreclosure shouldn't be necessary for anyone, he said.
"If you can't find a buyer as you approach foreclosure, you're an idiot," he said. "If someone's going into foreclosure right now, now's the best time for it to happen to you, because you're going to get top dollar for your house. People are going to come in, they're going to spare you the indignity and the hassle of being foreclosed upon."
Steve Blazevic of Phoenix buys and sells houses around the country through his company, Blazevic Funding. Although people come to him to avoid foreclosure, the majority of his customers right now are investors.
He said foreclosures likely are down because of low interest rates and high demand for houses. But that could change.
"Banks are just wanting to loan money to anyone with a job," he said. "It's short-term. I wouldn't be surprised if the figures (foreclosures) are higher in two years."
Buyback companies essentially fill the role of a real estate agent. They usually find private investors to buy houses, clean them up for "curb appeal" and market them to potential buyers.
R.G. "Rock" Argabright, a longtime agent with Realty Executives in Ahwatukee Foothills, said he thinks competition is good for the community.
"Competition is the check and balance of any industry," he said. "I'm not against them whatsoever."
Homes are selling so fast that people can unload them quickly whether they go to a real estate agent or a buyback company, he said.
A franchisee with the company that advertises "We Buy Ugly Houses" says foreclosure is just one reason why people sell their houses through the company.
"My main clientele are ones who either don't want to do any repairs or they can't afford to do any repairs," said Randy Courtney, a real estate broker with Courtney Valleywide Properties in Tempe and a franchisee in the Valley for HomeVestors of America, the a Dallas-based "We Buy Ugly Houses" business.
Courtney said depending on the condition of the house, the company can offer people 5-10 percent less for their house than what they would get selling it conventionally with a real estate agent. Most of the houses Courtney buys are in Phoenix, he said, because that's where older houses in need of repairs tend to be located.
Roger Richards, who now rents a trailer in Maricopa, sold his home on the west side of Phoenix to HomeVestors.
Richards said he is disabled because of injuries he suffered in a motorcycle accident, and because of that, he couldn't afford the payments on the house.
He said he was nearly two months behind on payments and getting close to foreclosure.
"I didn't want that to happen," he said. "I wanted to keep my credit as best I could."
In addition, he said selling the house became difficult for him.
"There were a lot of repairs that had to be done to the house that I physically couldn't do," he said. "I figure that I lost some because of that aspect, but the convenience and the less stress I had to go through was well worth that."
Anyone considering selling a house to a company like Flatland Investments or HomeVestors, should check with the Better Business Bureau to see whether there are any complaints against the company, said Jeremy Brandt, president of Dallas-based fasthomeoffer.com.
In addition, Brandt said, consumers should check the company's references and try to speak with one to three homeowners who have worked with the company.
Businesses like Flatland Investments are unfairly pegged as predators, Nee said. But the way he sees it, they are helping people avoid foreclosure - something that negatively affects credit and can make it difficult to buy another house.
"Many investors are stopping the actual number of foreclosures," he said.
"With anything, there's some people out there in it strictly for themselves, not looking to help anybody. You hear horror stories . . . but there are some really good companies out there."