An undervalued real estate market and glut of home foreclosures have led one father and son team to the prizes of real estate investing.
Craig Pattberg once was a civil engineer. Now he buys and sells foreclosed homes from the U.S. Department of Housing and Urban Development, a federal agency charged with marketing homes whose loans were insured by the U.S. Federal Housing Administration.
When homebuyers default on an FHA-backed loan, the government is required to pay off the lender. The home then becomes the property of HUD.
In Salt Lake County alone, Pattberg said, an average of 18 to 20 so-called "HUD" homes are listed for sale each week.
While Pattberg has purchased a number of HUD homes for his own investment purposes, he makes most of his money through real estate commissions on sales of HUD homes to first-time homebuyers and investors.
With his son Matt, the two run their own real estate company, Allpro Realty Group Inc., at 1178 E. Brickyard Road in Salt Lake City. Craig Pattberg's son-in-law, Rodger Smith, runs an office in Utah County.
"As a buyer of HUD homes, you have to use a real estate agent, you have to have $1,000 earnest money and you have to have a pre-qualification letter," Craig Pattberg said. "You have to have those things in order to bid. When someone's ready to make a bid, we'll sit down with them and do all the government paperwork and enter the bid."
From Jan. 28 through March 25, HUD home prices in the Salt Lake Valley ranged from $34,000 to $162,000. Craig Pattberg noted that there were 129 HUD-owned homes that went under contract during that period.
"There's many more bank foreclosures and short sales than there are HUD foreclosures," Craig Pattberg said. "HUD foreclosures are more predictable. They have a system. When banks get foreclosures they don't handle them that well.
"You can put an offer in on a bank-owned home, and then it could take you literally months to know if you got the house. You put an offer in on a HUD home — you have a 10-day viewing period — and on the 11th day you know if you've got it."
HUD homes vary in condition, but modest safety fixes and cleaning are routine on all foreclosed properties.
"Most of the homes will just require carpet, paint, maybe some vinyl flooring and maybe some patching of walls," Craig Pattberg said. "The vast majority of them are in decent shape."
Pattberg even has launched his own Web site, www.hudhunters.com, which features weekly updates on HUD foreclosed properties, offering pictures, write-ups, tax values and a rating system.
"In 2003 and 2004, on average, when we helped someone get into a property, there was equity of a little over $23,000," Craig Pattberg said. "They're quite a bit better as far as equity than regular bank-owned homes."
E-mail: danderton@desnews.com