Profiting from foreclosure 'without selling your soul'

By JIM WASSERMAN
Sacramento Bee
Thursday, May 24, 2007

Alexis McGee talks about as fast as anyone you'll ever meet. She has to, for this is her time.

"The stars are aligned, guys," she tells a national audience of foreclosure investors, each paying $19.95 to hear her 90-minute conference call from Kauai's Poipu Beach, where she is on a working vacation. "The time has never been like it is right now. We have more chances to buy than we've ever had before."

In the world of home foreclosure there are legions of get-rich-now gurus, opportunists and house buyers who live with the label of "vultures." And then there is Alexis McGee, 46, of Fair Oaks, Calif., who tells people they can profit from other people's financial crises without selling their soul, without lying, cheating or stealing or "crossing the gray line of integrity and ethics just to make the deal."

McGee says foreclosure investing should be about "helping people" and doing deals so the owner who loses a house would come to visit yours a year later if you asked.

It sounds goofy in these toughening times. But more than two decades after she says she earned her first $180,000 in real estate at age 23 -- brokering a $12 million apartment deal in Solano County -- McGee and her family-owned Web site ForeclosureS.com have become authority figures inside the foreclosure storm blowing through the housing market.

"They're a pretty well-known information provider," says John Grant, executive director of the National Association for Responsible Home Rebuilders and Investors in Washington.

"This is definitely an important and growing part of the real estate-related industries," says Christopher Cagan, foreclosure specialist and director of research at Orange County-based First American CoreLogic.

McGee has discussed foreclosures on "Good Morning America" and the financial channel CNBC. The Wall Street Journal, New York Times, USA Today and The Sacramento Bee quote her and cite the data she gathers from property tax records and other sources. She says her $9,500 investor seminars are sold out through June. Besides her telephone talks, people pay $49.95 a month for her online lists of foreclosures in 1,350 U.S. counties. In the fall, her book, "The Foreclosures.com Guide To Making Huge Profits Investing in Pre-Foreclosures Without Selling Your Soul," will be published by John Wiley & Sons.

Though her privately owned firm doesn't release financial information, McGee says she is doing well on the downslope of the housing boom. She makes no apologies for the wealth her peculiar real estate niche has delivered.

"I'm allowed to make a lot of money. I've earned it," she says, sitting in her Fair Oaks office filled with family photos and pictures of beaches.

This is the nerve center of foreclosureS.com. It's on this Web site, which her husband, Tim, claims is the oldest foreclosure site on the Internet, that would-be investors get to work. They browse listings of properties where owners have missed mortgage payments for at least two months. They check out houses headed for auction and repossessed by the bank, making sure in all cases the homes still have equity, since no one wants a house worth less than what's owed on it. Then they call the owners.

The goal is to buy the home at a low enough price to profit from reselling it for a little more. The contention is that distressed homeowners will get a better deal, an honest deal, that leaves them with some equity instead of losing everything to foreclosure.

According to McGee, nearly 254,000 new households in the United States fell behind on mortgage payments in January, February and March, and many are headed to the auction block unless someone intervenes. Some of those stepping in are McGee-schooled investors, trained to call 25 people a week who are in default.

Their mission, as defined by McGee, is to scope out investment possibilities and offer help to avert a foreclosure -- whether or not they get to buy the house.

McGee says the foreclosure investing she teaches is about offering everyone involved the best exit from a bad situation. Yet she acknowledges the longtime stigma of her business. She says, "I am asked, 'How do you feel about stealing grandma's house?' "

Some nonprofit home loan counseling centers are leery of foreclosure investors who use McGee's site and others like Irvine-based RealtyTrac. They say no one who is late with payments should sell before first talking with a counselor.

"Do the math on any of these organizations," says Doug Robinson, spokesman for the NeighborWorks Center for Foreclosure Solutions in Washington, D.C. "They are looking to buy low and sell at something above low. And that just means that the sellers didn't get something a little bit above low."

But the idea wins favor with banks because it avoids foreclosure, says Dustin Hobbs, spokesman for the California Mortgage Bankers Association. He calls it another tool that helps borrowers "avoid whatever the worst-case scenario is for them."