After hitting a two-year high in March 2007, April foreclosures slipped 1 percent, according to RealtyTrac, an online marketplace for foreclosure properties. In its April 2007 U.S. Foreclosure Market Report, RealtyTrac said for the second month in a row, six out of 10 cities with the highest foreclosure rates were located in California.”Whether the decrease in April is the beginning of a similar trend this year remains to be seen, but we expect foreclosure activity to at least stay above last year’s levels for the remainder of 2007, fueled by a combustible mix of risky loans taken out in the last few years – many in the subprime market – and slowing home price appreciation,” James J. Saccacio, CEO of RealtyTrac, said in a statement.
Obviously, foreclosure is a bad word among homeowners, but for companies such as Palomar Enterprises (OTCBB: PLMA), it’s a word of business. Taking notice and advantage of the softening market, Palomar has redirected its business strategy, specializing in the foreclosure market. Most of Palomar’s business is conducted in Southern California, with an emphasis on coastal and development properties – putting it in the prime spot for business.
Palomar COO Brent Fouch told Market News First the company expects the softening in the market to continue for another two to three years, creating opportunity for the company as it switches gears.
“We look at this market as an opportunity,” Fouch said. “We are small and aggressive, and have the foresight to know the foreclosure market is increasing rapidly. Being small and aggressive allows us to actively pursue those foreclosures easier than bigger firms that may be stuck in a routine of how they conduct the business.”
Rather than focusing its business on buying and lifting homes, then waiting on the sale and making commission, the company actively pursues foreclosures at a discount, and turns them around for immediate re-sale.
“We have HUD agents and bank-owned properties that come to us weekly – we select through those and we cherry-pick the best ones, and buy those properties at a discount to market. The goal is to turn around and sell them within a roughly 90-day period.”
Fouch said the company usually gets properties at a 30 to 40 percent discount, make cosmetic improvements as necessary, and then sell the properties for profit. He added that among the current existing adjustable rate mortgages, an estimated 20 percent of those will end in foreclosure.
In a down real estate market, the company reported an increase in first-quarter revenue 2007, reporting $323,000, or an 85 percent increase from $174,704 in revenue for the first quarter 2006. Gross profit also rose 34 percent increase to $111,000 in the first quarter of 2007, up from $76,000 in fourth quarter 2006.
“That’s due to our business model, really staying ahead of the real estate market that we’re in,” said Fouch. “We’re buying properties at a time when other people are sitting on the sidelines, [grabbing] those properties at a discount.
“At a time when our assets are increasing, our revenue and gross profits increasing quarter after quarter, at a time our stock is trading around the penny range … investors can buy the stock right now at a penny a share at a time we are growing with our assets, revenue and gross profit. It’s an opportune time for investors to own our company if they desire to be in the lucrative foreclosure business,” Fouch concluded.
