Foreclosure buying binge chokes company

GRAND RAPIDS, Mich. (WOOD) - For investors, the foreclosure crisis was like a gift. Desperate lenders were dumping some defaulted homes for pennies on the dollar.

A family company, the Beckett Realty Group, capitalized on the foreclosure business and now own more than 400 properties, 200 hundred of which they bought during the foreclosure frenzy. The group is, city officials believe, the biggest residential landlord in the city.

The Becketts financed the buying binge with traditional bank loans and mortgages with private investors who were chauffered around in a Beckett company bus to view potential investments.

One of those houses, 611 New SW in Grand Rapids, was once worth $60,000, but sold out of foreclosure for $15,000.

The house at 611 New was financed by a single investor who put up $30,000. He reportedly earns $250 a month from the rent the Becketts collect and after five years is supposed to get back his full investment, plus part of any profit made from the sale of the house.

On their company website , the Becketts say they "have a passion to redeem the community and neighborhoods that our grandparents grew up in, that have been neglected and thrown by the wayside." One neighborhood organizer said the Becketts did improve some houses in an older Grand Rapids area, but in the last year became slower in responding to housing issue complaints.

For example, 611 New SW got the attention of housing inspectors after the tenant complained. They found the house had not been registered with the city as a rental and, upon inspection, had 29 code violations. A housing agency withdrew its eligibility for federally-funded rent support and the tenants moved out.

In the summer of 2010, the Becketts were fined $25,000 by a 61st District Court judge over code violations on 77 properties. Veteran housing inspectors told Target 8 the fine, in their memory, was a record.

Then, in autumn, company CEO Josh Beckett pleaded guilty to a misdemeanor criminal violation for the slow fix of a property at 922 First NW. He told the court fire damage was worse than they thought when they bought the house and it took longer than expected to fix it.

"We should have done it quicker," he said, "but it's completed and it is livable. It's a great asset now to the community."

Beckett said Thursday they are nearly caught up on repairs to all their properties. He said they are nearly finished rehabbing the properties they bought, some of which he said were in poor shape.

He said it took three years to rehab 190 houses.

Last week, Mercantile Bank filed suit in Kent County Circuit Court against Beckett Investments to foreclose on a dozen homes the Becketts had financed.

The Becketts were selling one of those homes, 1440 Escott NW, to Victor Escribano Jr. and his family.

"We just got another letter," Escribano told Target 8 investigators. "The house is going into foreclosure so we're losing the house."

The Escribanos were buying the house on a land contract, in which the seller holds the deed until the buyer finishes paying it off over a period of years.

Josh Beckett said his company has worked out a deal with the bank on the dozen properties, and that there are three or four different options, including having someone else buy them.

How that impacts the Escribano family is unknown.

Beckett claims the Escribanos never made any payments on the land contract.

But the Escribanos lawyer said they did make payments until the bank got involved and they discovered the land contract is more costly than the house is worth. The lawyer says Victor Escribano is meeting with the bank Friday to see if he can get financing to keep the house.

Target 8 investigators also found the Becketts were behind on property taxes.

As of mid-October 2010, Target 8 investigators found the Becketts owed at least $526,000 in delinquent property taxes on 154 properties.

"We don't usually have big amounts like that from one taxpayer," said City Treasurer Al Mooney.

Josh Beckett told Target 8 in November that "the honest truth (is) we bought too many."

In an interview Thursday, Beckett said that three years ago "you never thought today would be like today. We thought this is a window, a year or two maybe, before prices went back up and the market starts to recover."

But the recovery didn't happen.

He said the company ran into cash flow problems and maybe bought too many foreclosed houses too fast.

Their plan, he said, was to sell many of the houses at a profit after they fixed them up. But the real estate market has not recovered, prices are depressed and houses are hard to sell.

"We have a hundred-and-some properties on the market for sale," he said. "We wanted to shore up our cash flow."

So they have reorganized the company and cut costs. He said they closed their office on Fuller near Michigan and eliminated their real estate division to focus on the rental business and property management.

Beckett added they have laid off employees and managed