Posted by kawikaCA on March 11, 2004 at 11:25:03:
Thanks for the clarification. I should have read the original post first.
Foreclosure auctions: bleaachhh, not where I live - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 11, 2004 at 09:40:21:
This is in response to those who wanted to know the outcome of that deal I wrote about a few weeks ago, where the USDA was foreclosing on a first where they were owed about $26k but inexplicably, set their bid at just over $16k.
The FMV of the property was around $50k. There was a second for $14k, also in default, held by a local credit union.
The seller had wasted months holding out for a full price, all cash sale, and finally called me up about a month before the auction.
I offered her $2500 to walk, and offered the second $1k for their note. Both the second and the seller declined, both holding out for full price.
So I decided to bid at the foreclosure auction. I live in a small town in an economically depressed rural area, so there are plenty of foreclosures here, but only once in a blue moon is there one with any equity. The vast majority of the properties are overfinanced, some markedly so, which means nobody but the referee and the lender ever attends the auctions.
On this deal, the second had given me the impression that they did not intend to bid, plus the judgment amount was not that easy to find, as it was not given in the foreclosure notice and required jumping through some hoops to ascertain. Since the seller told me she hadn’t talked with any other investors, I anticipated little competition at the auction.
Wrong. At least five other potential bidders showed up, PLUS the second’s attorney. The referee, who is my own attorney, said it was about the only foreclosure sale he’d EVER handled as referee in which anybody came to bid!
The interesting thing was, as far as I could tell, NONE of the other potential bidders were “real” investors, except for one guy who said he was from a city several hours away. There was a local electrician, another businessman, a neighbor of the seller and a woman with a couple kids in tow.
As expected, the first opened the bidding at $16k and did not bid again. The second, the out of towner and I were the others bidding. I dropped out when I reached my predetermined cutoff amount of $26k. The out of towner kept bidding, and every time he did, the second raised the bid by $100. This went on forever. Finally, the out of towner stopped the bidding and made an impassioned speech: “I am only looking out for an old lady here. I don’t know the owner, but I guarantee, if I buy this house I will let her stay there for as long as she wants, with minimal rent. I don’t care about making money. I’m just trying to do a good deed.”
Yeah, right. The second’s lawyer was rolling her eyes, and the rest of us were stifling laughter.
Then the second’s lawyer made her own speech: “I don’t care how high you are going; I am prepared to go higher.” Unbelievable!
And she did. The other guy finally stopped at $37k, and the property was struck off to the second. From the deposit check she gave to the referee, it was clear she was prepared to bid up to $41k…on a property worth $50k, after repairs!
FC auctions no doubt offer good deals for experienced players in some areas of the country, but not in my back yard. And I still don’t understand banks. Oh well, at least it was good for an hour of entertainment.
Brian (NY)
Foreclosure auctions: Thanks for the story… - Posted by David Krulac
Posted by David Krulac on March 11, 2004 at 17:16:02:
Brian,
All this seminar hype has increased the number spectators/buyers at the foreclosure auctions. The bidders out number the properties being foreclosed, so its clear from before the auction starts that somebody’s going home without a purchase. 95% of the properties are no equity or sub-zero equity and get bought by the foreclosing lender, who is usually the bank holding the first mortgage. Invaribally several bidders don’t know what they are doing AND don’t listen to the conditions of the sale. Here the first bid is $1 OVER the amount owed to the lender. At every sale somebody bids $1 and thinks they are buying the house for a TOTAL of $1. Then the Sheriff stops the sale and re-reads the condtions of sale. One recent sale he had to stop twice and twice re-read the conditions of sale and further explained the procedure in monosylabic words.
I’ve bought and sold 100’s of foreclosed homes and have been doing this for decades. Of the 3 stages of foreclosure, 1. pre-foreclosure sale 2. at the foreclosure sale and 3. after the foreclosure sale, IMHO the second phase is the most difficult and most treacherous especially for newbies. There is next to no negotiations, there is all cash requirement sometimes on the spot, and there are minefields in the road to foreclosure.
Yesterday I had a forelcosure settlement and have another on Monday and another on Tuesday. One of these houses I tried to buy before the sale (The seller moved out and gave ME the keys, I gave the seller a contract.), went to the sale prepared to buy (the bank minimum was too high). I ended up buying from the bank after the sale for about 30% less than their “minimum” price at the foreclosure sale. The moral of the story hang in there, perserve, and every one that you don’t get puts you one closer to the one that you will get.
David Krulac
Central Pennsylvania
Come down to NJ … - Posted by Redline
Posted by Redline on March 11, 2004 at 14:28:01:
Come down and see the Bergen County auction on Fridays. Judging from your past experiences here, it’ll blow your doors off.
Average of 4-6 properties. Prices from $150k up to $10 million. About 140 people regularly show up. Of this number you’ve got atleast 10-15 well financed bidders.
A few weeks ago it was fun (and time consuming) to watch 8 different guys bid a house from $1.1 mill to $1.6 mil in mostly thousand dollar increments. Yikes.
RL
Great Story, you should ask all the … - Posted by Stew(NE)
Posted by Stew(NE) on March 11, 2004 at 12:38:39:
foreclosure guru’s if you can add this story to one of their books. This is the experience they will have 90 to 95% of the time. Hang in there though, there are the 5 and 10% experiences.
Re: Foreclosure auctions: … - Posted by kawikaCA
Posted by kawikaCA on March 11, 2004 at 10:43:32:
I felt like I was really there. That is interesting that the 2nd sent their lawyer to invest in real estate. I wonder if they had made an offer to the seller to. Drama all around.
Question, are you saying the judgement was recorded?
Thanks.
Great Story Brian. Thanks - Posted by phil fernandez
Posted by phil fernandez on March 11, 2004 at 09:46:46:
Wonder if the out of towner was JT. LOL.
Your experiance… - Posted by DaveD (WI)
Posted by DaveD (WI) on March 11, 2004 at 18:55:05:
…Sounds like a carnival complete with clowns. I firmly believe if it can’t be bought before auction either the lender, seller or I didn’t do our job. Sometimes the lender just has to get through to the other side of the sale to figure that out.
-Dave
Re: Foreclosure auctions: (oops) - Posted by kawikaCA
Posted by kawikaCA on March 11, 2004 at 10:50:34:
I meant “Question, are you saying the judgement wasn’t recorded?”
LOL! Come to think of it… - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 11, 2004 at 09:57:25:
…I did see a red BMW parked outside the court house!
Brian
Re: Your experiance… - Posted by David Krulac
Posted by David Krulac on March 12, 2004 at 06:24:15:
Most of the lenders get stuck on what they have in the property. In the larger organizations its a different person and department, sometimes in a different state that deals with the owner pre-sale and deals with the potenial buyer after the sale.
Most of the lenders are inefficient and often times don’t want to admit that they’re going to lose money on the deal, which happens most of the time. since the S&L crisis they are also concerned about private deals and the appearance that some body got a sweetheart deal. Some insider selling the property for less that its worth is a recurring nightmare. So to prevent the “appearance” they would rather let it go to the multi-list and let the public decide the price. Then if it sells at a loss it was the market conditions and not insider dealing.
The Sheriff Sales are a clowning exercise. There are so many people there that don’t have a clue, haven’t done their research, don’t know the sale process, and yet are ready to spend big bucks.
At a recent sale a bidder put in several bids of $100,000s, before he asked the Sheriff if his bid was in addition to the upset price or included the upset price. The answer would be about a $400,000 difference. So here’s a bidder willing to spend a half million dollars or so and didn’t know what he was doing.
David Krulac
Central Pennsylvania
Re: Foreclosure auctions: (oops) - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 11, 2004 at 11:10:05:
What judgment? Both the first and second’s liens were properly recorded, so that once the first was paid off, anything left over from the sale goes to the second, then to the owner, if there’s anything left over after expenses. When the bidding got to about $30k, the second was made whole, so why they themselves kept bidding is anybody’s guess. Apparently they think the property is worth more than it really is, or else somebody at the credit union wants their employer to be a RE investor. Their lawyer claimed she didn’t know their motivation, she was just doing what she was instructed.
Is that what you meant, or did I misunderstand your question?
Brian (NY)
Re: Your experiance… - Posted by rm
Posted by rm on March 14, 2004 at 06:20:19:
There’s a guy who needs to be on your wholesale list!
Re: Foreclosure auctions: (oops) - Posted by kawikaCA
Posted by kawikaCA on March 11, 2004 at 11:14:45:
Sorry, I was probably mistaken. You meant the 2nd had a judgement?
Thanks.
Re: Foreclosure auctions: (oops) - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 11, 2004 at 11:20:44:
No, no judgment; the second had not foreclosed. But since they had a recorded lien, they were entitled to any amount bid over the balance of the first up to their outstanding balance.
Brian (NY)