"I was shocked -- who in Loch Lloyd gets foreclosed on?" asked Tomasic, a Coldwell Banker All American broker.
Then she got her second Loch Lloyd listing. And surprise turned to revelation about what is happening to the values of homes in some of the Kansas City area's ritziest ZIP codes.
"It's not just one group of people, not just one income level -- foreclosures are affecting everyone," Tomasic said.
To be sure, most foreclosures today involve loans on lower-valued homes in the central city that were caught in the subprime mess. Yet, many experts said what is afflicting affluent neighborhoods with in-ground pools and private golf courses is only the latest sign of a widening mortgage meltdown.
A review by The Kansas City Star of real estate listings in Jackson, Johnson, Clay, Platte and Cass counties showed at least 50 homes priced $500,000 or more are in foreclosure or are subject to bank-approved sales to avoid one.
That is about 5 percent of the listings of homes in that price range. But experts said the number of pricey distressed properties could be even higher because some people sell their homes before letting their banks know they can no longer make the payments.
"You used to rarely see high-end foreclosures. Now they're more common," said Tim Harrison, an Overland Park real estate investment analyst who helped the newspaper identify troubled high-end properties. "People are desperately trying to get rid of houses they can't afford."
As more homes go into foreclosure, or sit unsold long enough, they drag down the values of neighboring homes.
Houses around the metropolitan area once valued at $1 million now sell at steep discounts of $200,000 to $400,000 or more. Those discounts reflect millions of dollars in bank losses and thousands of dollars in lost revenues for taxing jurisdictions. They also result in less dues paid to homes associations, which must spend more money to maintain their neighborhoods.
"It's affecting all the upper-bracket communities," said Dan Vick, the owner of Re/Max of K.C. in Kansas City, North.
Vick said the reasons were similar to those taking well-publicized tolls on middle- and lower-income communities: People bought more home than they could afford, taking out adjustable-rate loans that often were secured with little more than their paychecks and a promise.
They also borrowed to the hilt, with little equity left for wiggle room if something went wrong. When the housing bubble burst, property values plummeted, resulting in mortgages that were higher than what their homes were worth.
"It really catches up with people who have no equity in their homes," Vick said. "If they lost a job or had a divorce, and their house lost value, they literally have to bring money to the table to sell their home."
As a result, real estate agents point to some bargain-basement prices on homes boasting 4,000 square feet or more. Examples abound:
--A $1.5 million Blue Springs home with staircases to east and west wings, a dance floor and five garages listed for $1.05 million.
--A $1.4 million Independence home with two decks, a poolside wet bar, hot tub and waterfall offered for less than $1 million.
--A $1.3 million, 6,500-plus square-foot Hallbrook home with granite, marble and hardwood floors sold for $849,000.
--A $1.25 million Loch Lloyd home with a wine cellar and an imported English pub bar sold in foreclosure for $775,000.
--A $1.1 million Mission Hills home in foreclosure is under contract for less than $450,000.
Many of the homes are in newer subdivisions. Experts blamed demand and banks' liberal lending practices for helping push new-home prices higher in recent years.
"You saw a huge demand because anyone could get a loan unless they had really bad credit," said Curtis Koons, the director of assessment for Jackson County.
But prices that go up fast can fall even faster.
While not as risky as the variable-rate subprime mortgages that loan brokers sold to urban buyers with shaky credit, the loans sold to many high-end borrowers worked much the same. Called Alt-A loans -- because they carried more risk than A-prime loans -- they often were secured only by an unverified affidavit of a borrower's income.
"It was sheer speculation," said Kurt Eggert, a law professor at Chapman University in Orange, Calif., who served on the Federal Reserve's Consumer Advisory Council.
"Borrowers thought housing prices were going up. It made sense to them if they could hunker down and get a loan that didn't charge them the full amortized amount at first, and then in a couple of years they could refinance and get a better loan or sell and make a profit," Eggert said.
Consider the history of a house on 64th Terrace off Meyer Circle in Kansas City. A California investor bought it for $450,000 in 2003, rehabbed it and listed it for sale at $890,000, property records show.
For three years it sat unsold. Then suddenly the house was reported sold in 2006 for $1.23 million. Records showed the buyer took out loans totaling more than $1 million -- or about 90 percent of the home's value.
But the buyer never moved in, and the home has remained vacant. This past year, the home was listed in "pre-foreclosure." Now, its asking price is $850,000.
Neighbor Dan Bowman shook his head and wondered aloud: "How can a house sit unsold at $890,000 for three years and then get bought for $1.25 million -- then go into foreclosure? It doesn't make sense."
Vick said lenders are as much to blame as overly optimistic borrowers. In some cases, banks enthusiastically made loans to people whose credit should have been suspect.
Some of them "went into bankruptcy, came out and bought a house again, but they didn't change their lifestyle," Vick said.
Even some affluent homeowners got caught in the crosshairs of the bad economy. They had a business setback or got laid off at Sprint or another troubled company. Or they went through a divorce and could not keep up the payments.
Others are like Don Wratchford, who ran a successful business customizing and reselling homes after living in them a few years. Then the bottom fell out.
Wratchford said his latest 10,000-square-foot home in the Shoal Creek Valley subdivision "took a major hit in value." The house, which features a basketball court, was appraised about a year ago at $1.7 million. Now, it is listed for $1.1 million.
Often, an owner's only options are to sell at a steep discount or walk away and let the house go into foreclosure.
For neighbors, though, that presents a potential eyesore. Often they must maintain vacant homes to keep them from dragging down property values throughout the development.
"It's a huge concern for us," said Mark Spraetz, the president of Lions Gate Homes Association, where neighbors banded together to tend the yards of several foreclosed homes.
Even so, one person's misfortune can be another's gain. Buyers with money to burn are finding the deals of a lifetime.
"I think it's a great opportunity," said William Seitz, who bought a bank-owned home in Loch Lloyd for nearly half its previously listed value of more than $1 million.
Seitz and his wife jumped at the deal before they even sold their Deer Creek home. "You hear a lot of doom and gloom," he said, "but there's never been a better time to buy a house."
Now, all he has to do is sell his Deer Creek residence.
So far, he hasn't had any takers -- even after dropping the price $100,000 below the appraised value.
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FOR SALE
Independence home, two decks, poolside wet bar, hot tub and waterfall. Originally valued at $1.4M. Now a steal at under $1M.
FOR SALE
Blue Springs home, two wings, dance floor, five-car garage. Worth $1.5M. A bargain at $1.05M.
FORECLOSURE
$1.25M Loch Lloyd home, wine cellar, imported English pub bar. Sold for $775,000.
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@ Go to KansasCity.com to read more stories on the mortgage crisis by Paul Wenske.
To reach Paul Wenske, call 816-234-4454 or send e-mail to pwenske@kcstar.com.
To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com. Copyright (c) 2008, The Kansas City Star, Mo. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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