Posted by Matt (MPD) IL on July 14, 2002 at 14:03:39:
JT makes a good point, although I’m not so sure the seller is including themselves as a possible bidder in the circumstance.
More likely we don’t know exactly how the ad is worded. It could simply state that the house will be sold to the highest accepted bid. With that in mind the seller could legitimately reject any and all offers.
In any case, in my experience with these types of transactions the wording and pricing in the ad is designed to get the buyers to the auction. 90% of the potential buyers will leave shortly after they arrive and hear what the bids have gone up to. (They thought they could “steal” a house at the advertised price).
And what the seller will have left is those that are truly interested in the property. At this point people’s emotions will come into play. Husbands/wives will fall in ‘love’ with the house and refuse to let it go to the next bidder, subsequently the price continues to rise and eventually all other bidders back off. If the price is still not high enough, the seller has the right to refuse the offers based on any number of reasons that should be spelled out when you arrive to start bidding in the first place.
The whole idea of selling a house this way is to create the illusion of a bargain. It happens all the time and we’re seeing it more and more in this area especially during the nice weather months when people are most actively looking to purchase and move. The ad will undoubtedly draw a great number of “interested” bidders but only a few will end up staying for the end result. It is a marketing tool that rivals “closeouts” and “clearance” sales at most supermarkets and the like.
However, this could be as JohnBoy pointed out earlier, a second mtg, a foreclosure, or any other number of things like a burnout etc. Let the buyer beware.
While enjoying my Sunday morning coffee before church this morning I ran across an add in the paper. WHat do you guys think. It Says:
Large 5BR/2full baths, 2half baths, brick in Elkins Lake (upscale). Monthly club dues $121. Includes golf, pool,/tennis clubhouse.
$74,500 or Best Reasonable Offer
Inspection Sat-Sun 10a-4p
House will be sold Sun night to highest bidder.
What does a newbie like me do about this? I’m sure the house is probably worth every penny and more. Time is short, should I even attempt it? I get butterflies thinking about it.
This is straight out of a book “How to Sell Your House in Five Days” Author’s last name begins with an E. Elkins or something like that.
It is an auction to quickly get the best price for a property. The opening bid is set well below market value to lure in lots of potential buyers. It will probably sell for market value.
What’s a newbie to do? Laugh. Why would you want to compete to pay full market value on a property?
Well, maybe also study the technique so you can use it sell a property in a hurry, such you ever need to do so.
I suggest you go have a look for the fun of it but DON’T BID! You need to get around, look into things like this to get a “feel” for real estate.
You should NEVER bid on something like this until you check out the property carefully and go down to the courthouse and check on the deed, mortgages, liens, etc.
Next time you will know to do your “homework” in advance and be sure of what you are getting.
Is this a foreclosure sale? You say this is an upscale area. What does a house like this usually sell for? Since you only say this is PROBABLY worth every penney and more, it sounds like you don’t even have a clue what the value of the home is.
If this is an upsacale area for $74,500, then what is a low or average scale area? Homes in those areas sell for like $25k or less if $74,500 is upscale???
What this “sounds” like based on the little info you gave, is this sounds like a foreclosure sale and it sounds like this may be a second or third mortgage being foreclosed on based on the amount listed. If it is a second mortgage then you would have to still deal with paying of the first mortgage. If this is an upscale area of $400k homes, then there may be a $300k first mortgage where this $74,500 is a second mortgage. A foreclosure on a second mortgage does not wipe out a first mortgage since a first mortgage is in front of all other mortgages. Only the first mortgage can foreclose where it can wipe out any secondary mortgages behind it. If this is a second mortgage then only any liens behind the second could be wiped out through foreclosure, but any mortgages in front of the second you will still have to deal with.
We need more info about this.
Is this a foreclosure sale? If so, what position is the mortgage being forclosed on in? Are there any other liens on the property? What kind, how much are they?
If they have an association fee, then they most likely have an association board, who night not like NOO in “their” neighborhood. $74,500 sounds very low for what you described although I admit I know nothing about your area. Is it a condo or co-op that the corporate enity is trying to market? Don’t get carried away, but definately go and check it out. Do your homework. Scott
Thanks Ron. I really appreciate the sound advice I’m getting from all of you. I kind of figured it would go higher than I needed to pay. I called the number for more info, but my call hasn’t been returned yet. I’ll let all of you know what I find out, if anything.
I don’t have the answers to all of your questions, just the add in the paper. I will add that the houses in the neighborhood run up to 500K. I live in SE texas in a relatively small town. I think our RE is less expensive than other parts of the country. I’ll try to get more answers after church.
Thanks Scott. What does NOO stand for. It is a house. I’m very familiar with the neighborhood. In fact, we own a lot out there. I think I’ll mosey out there after church to get a better look at it. I’m sure there will be lots of bids. If it’s in good condition, what would my next step be?
Didn’t you say that there was a crowd of people looking at the property on a stormy day? My guess is that it will be a waste of time to do anything more with this property at all. You are dealing with a seller who is motivated to maximize the sales price and is following a sophisticated game plan. The chances of there being a deal here is approaching zero.
However, whenever there is an auction situation there is the chance that everybody will think “I can’t possibly get it” and will not bid. HOWEVER, unless it is an “absolute” auction, the seller may refuse to sell the property at a low price. In fact, my guess is that the owner will refuse to sell at a low price. You should do only one more action, if you do any, in my opinion. You should call and ask if their auction is an absolute one, whether they will take the highest offer that they receive. You might not want to use the word “auction,” since the book says this selling approach is not an auction. Of course it is. What they will do is call around between the bidders on the telephone and tell each one what the current bid is and ask whether you want to top it. When nobody will top a bidder, it is ready to be sold.
Then that is what this sounds like. It sounds like this $74,500 is a secondary lien that is foreclosing. So you need to find out what other liens exist, how much they are, and what they are.
NOO= non owner occupied. Johnboy raised some good points (as always) I would call and ask if there is a copy of the PTR (priliminary title report) to inspect. I would also ask for a copy of the homeowners association handbook. The main thing is that you at least show up whether you bid or not. If you were planning on this for a personal res. it would still behoove you to look into restrictions for NOO as you may want to move later and keep this place as a rental. That’s what I did with my first residence. Scott P.S. Have you gotten pre-qualified for financing?
I’m still waiting for them to return the phone call from yesterday. Based on the ad, this sounds like the absolute auction you were talking about. It said the property would be sold to the highest bidder. I’ll be sure to ask when I talk to them.
I thought that if nobody bids (highly unlikely) and I could have gotten it for a low price, I’d kick myself if I didn’t bid. Thanks for all of your insight.
Bill Effros is the name of the author of the book entitled “How to Sell Your Home in 5 Days”.
(nt) stands for “no text”, which means that there is no text in the contents of the post. Everything that needs to be said is in the subject line. It lets readers know that they don’t need to open the post. It’s a courtesy to the readers.
Since Dee Dee mentioned that this property is in Texas, it can’t be a foreclosure (Trustee Sale) since, by statute, all trustee sales here must take place on the first Tuesday of the month.
Are there any states where foreclosure sales take place on Sunday? I’d think that would be quite unusual. Is it permitted in Illinois? In trust deed states, most sales would be conducted by attorneys and I doubt that you’d find many lawyers who would voluntarily work on Sunday. It would interfere with their golf games. And in mortgage states where the Sheriff conducts the sale you’d have to get them away from the donuts at the local coffee shop long enough to conduct the sale. (LOL) Here in the Lone Star State, we can’t even get the Constables to serve writs of possession on weekends.
Posted by Matt (MPD) IL on July 14, 2002 at 11:01:57:
It’s also possible that this is a person that read the book ‘how to sell your home in 5 days’. One of the tactics is to market the property with a “shocking” low price in order to get people looking at the property. Using an “auction” method while reserving the option to accept or decline any and all bids, the seller takes any offers in an open auction until a time of day. The winning bid will be the highest most acceptable offer at the end of the day.
Sounds like a bargain? Well, it just might be. Or it might just be the “illusion” of a bargain.
When you get there you’ll be told what the current bid is, when the bidding is closed, and what terms the seller will accept as an offer.
One broker/auctioneer here locally does a similar program where bidders must have 10% cash down, no contingencies, and open bid until they are the last one standing. I’m told that this “illusion” of a bargain usually nets somewhere around 10-15% above asking price (reserve price) to the seller and when you see the final numbers the end result is they end up paying somewhere around market price.
It’s a great tool if nothing else to get tons of potential buyers into a house, especially if you are a mortgage broker, licensed agent or an investor with other homes for sale. Even if you don’t get an acceptable price for this particular home (as the seller I mean) you could still end up with new potential clients, or perhaps sell them another house on your terms.
Man, you gotta love marketing eh?!
Good luck.
Hope it truly is a bargain and that you get an awesome house at an even better price, but as everyone’s said so far… be careful and know exactly what you’re buying.