PERSONAL FINANCE / KATHY M. KRISTOF : Few RTC Deals for ‘Little Guy’
The federal agency selling properties owned by failed savings and loans has launched a new “small investor program,” complete with slick brochures and advertisements in dozens of newspapers nationwide.
But the program, aimed at buyers who have between $5,000 and $5 million to invest, is not well suited to the little guy.
The program is in response to charges that the Resolution Trust Corp. caters to billionaires who buy RTC properties for pennies on the dollar, only to resell them at a profit. This is particularly controversial because the agency is funded by taxpayer dollars.
While some RTC officials say this criticism isn’t completely fair, it was powerful enough to threaten the agency’s funding. So the small-investor program was born.
In theory, at least, the program gives individuals access to all the properties owned by the RTC, which gets most of the real estate and salable assets--computers, furniture, artwork, cars, etc.--of failed savings and loans.
Thus, the agency has $10.5 billion worth of homes, apartments, office buildings and vacant land, not to mention $18.4 billion in non-performing loans--which may eventually become more RTC-owned homes, apartments, office buildings and vacant land. And all of it is for sale.
The RTC is also selling office furniture, computer equipment and several risky investment securities through this program. Some sophisticated investors say you can make a killing buying RTC assets if you know what you’re doing.
Still, if you’re thinking that this might be an easy and inexpensive way to buy a home or vacation property, you’re probably wrong. Despite its name, the small-investor program is not geared to Joe and Jane Burbank investing for their young family, said Muriel Watkins, director of the program.
Instead, it is designed mainly for well-heeled investors who want to buy or develop shopping centers, tract housing or commercial properties, but who have less money than the billionaire Bass brothers of Texas.
There are some single-family properties available--homes, condominiums and co-ops--but not enough to speak of, Watkins said. Operators on the RTC hot line say there are roughly 65 single-family residences and condo units for sale in Los Angeles County, 21 in Dallas, 23 in Atlanta, 9 in Chicago, 5 in Detroit and just 1 in Cleveland. No single-family residences, condos or co-ops are for sale in New York City, but the RTC does have 22 available in New York state.
How do you buy assets from the RTC? It depends on what kind of goods you’re interested in, and when. Sometimes you can buy RTC real estate through realtors, sometimes through public auctions or sealed bids. In some cases, the sales process is complicated enough to warrant attending a three-hour investment seminar before trying to bid.
Even in the simplest cases, the process can be much tougher than similar investments elsewhere.
Consider the homes the RTC has for sale. When looking for a house, most people simply call a real estate broker, who finds out what they want and where, then shows them houses that fit the description.
Those who want to buy from the RTC need to go through several additional steps. The first is finding out what’s available. To get a list of properties, call the small-investor hot line at (800) 421-2073.
The operator will ask what area and type of property you’re interested in and tell you how many properties fit that description. But you can’t get details--such as exactly where the property is located, what it’s like or what it costs--by phone.
Instead, the RTC will mail you a computer printout “within five business days.” In practical terms, that means about two weeks. Notably, the RTC says its computerized property listings are updated every two weeks, which means it’s nearly impossible to get a fully up-to-date listing. Fortunately, properties aren’t selling like hot cakes these days.
Want to see a property on the list? There’s a contact listed for each property. But many of them are not brokers. They’re bank officers who deal with foreclosed real estate. They will generally refer you to another “authorized broker.” In many cases, properties on the list have been sold, are not yet available or have erroneous prices.
“I think they’re still trying to work some of the kinks out of the system,” one RTC agent said.
Want to make an offer? More hurdles. The offer goes to the agent, who takes it to an RTC representative, who decides whether or not the price is right. The offer must also go to RTC lawyers, who review your contract to make sure the RTC can’t be held liable for subsequent problems with the property.
If that goes well, the lawyers sign off, the RTC property manager signs off and--somewhere between two weeks and two months after your offer was made--you get to start escrow.
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How to buy from the RTC:
* Get basic information. Call (800) 421-2073 and ask for the small-investor kit, calendar of events and--if you already know what kind of real estate you want--a list of properties. The small-investor kit and calendar will be mailed within two working days. The property list takes longer, usually five business days.
* Investigate the properties. There are essentially three different ways to buy assets: through auction, sealed bid and a broker. Sometimes properties that are scheduled for auction can be purchased individually beforehand. But knowing the process when dealing with a big bureaucracy can be pivotal. For auctions, call the auctioneer or RTC representative listed as the contact. They should know when you can look at the property, as well as terms and conditions of the auction. Make sure you know exactly what’s for sale, what you would pay for it and how you would pay (cash or secured financing) before you attend.
* Be persistent. If the RTC rejects your bid, consider making a second offer several months later if the property is still on the market. RTC officials say they are barred from slashing prices too much in the first few months, but they get greater freedom after six months and tremendous leeway if the property has been listed for a year or two.
