Foreclosure-business novice? Be careful, experts say

NEW YORK — If you've ever seen those infomercials promising untold riches just waiting to be tapped in the real-estate market, Wesley Barney has a message for you: It's not quite that easy.

Some 18 years ago, Barney, 48, saw those commercials, too. According to the ads, a person could make a small fortune buying and selling real estate in foreclosure — in other words, property seized by a bank because the owner couldn't pay the mortgage or property taxes.

Barney was intrigued. Then a New York City firefighter, he moonlighted as a security guard to help pay the bills and dreamed of owning real estate.

"Watching those late-night TV programs, I thought, 'Maybe I can do this,' " said Barney, who now runs his own real-estate investing business.

Now, he owns property in New York City and upstate, and as far away as Kansas City. He runs Ultimate Investors Real Estate Club, a group for real-estate investors.

With foreclosures across the country rising rapidly as homeowners succumb to the effect of rising interest rates on adjustable-rate mortgages, Barney and experienced investors like him have seen many more opportunities to buy. But they caution those new to the field to tread carefully.

"Buying property in foreclosure is not as easy as people think," said Uri Shamir, a commercial real-estate broker with Kaplon-Belo Associates in Long Island City, N.Y., who teaches real-estate investing at Queens College. "You have to be very careful about what you're doing."

Many foreclosed properties are sold at auctions. Most of the bidders are professional investors.

But how do you know how much to bid? That's the hard part. You'll almost never have a chance to check out the inside of the property. In certain circumstances, you could be on the hook.

"The biggest mistake people make is that they don't do their research before they go to the auction," said Jessica Davis, CEO of Profiles Publications, a publisher of foreclosure listings and advice.

Most of all, building a business by buying properties in foreclosure is a demanding venture fraught with risk. It can be done, but success won't come as easily as the hucksters would have you believe.

"This is not like buying a lottery ticket," said Davis. "These people who do the infomercials sitting by the pool in Hawaii — that's a fantasy."