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So, I'm hearing that many court-house step homes don't sell and become REO

By BayArea   Follow   Mon, 4 Jun 2012, 11:21am   1,557 views   12 comments
In Oakland CA 94618   Watch (1)   Share   Quote   Permalink   Like   Dislike  

- House forecloses
- House gets auctioned off at the court-house steps
- If house doesn't sell there, it becomes an REO

There must be a threshold auction "selling" price, correct? For instance, if a $300K house is getting auctioned off, it has to reach some pre-determined amount before it's allowed to sell to the highest bidder? If someone bids $50K for that $300K house, surely the bank won't let it go for that low of a price.

So what factors decide what that threshold price is and what % of fair market value is it typically? To avoid this issue, does the bank start off the auction at the threshold value? That way if anyone bids that amount the house sells?

I've been to plenty of auto-auctions where they will bring out a car, and start the bidding at $0. The threshold selling price is never made public because they want to start low and create an emotional frenzy. If that car doesn't reach the threshold amount, the car is driven back to the lot and the auction company will try again the following week.

I look forward to your reply.

Thanks

BayArea

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1. EastCoastBubbleBoy Follow Befriend (11) 104 threads 454 comments Premium

   1   7:17pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   Sound as if your talking about what I believe is referred to as a “reserve auction” where there is a predetermined, non-published, minimum sale price that the seller will accept. I have heard of this for cars – my understanding is that if the minimum is not met, the “winning” bidder is given the option of buying the car for the reserve price. For houses I’m not sure what the protocol is – probably depends on the type of auction. I don’t know about the bay area, but I was at an auction here on the East Coast at my local county courthouse to educate myself on how it works – what an eye-opener! First, they wouldn’t start the bidding unless the Plaintiff (or their representative) was present (in other words the Bank) as they had “first dibs”. I know this because the trustee handling the sale presumed I was form the bank, at least initially, as I was the only one in a full suit. Furthermore, although the stated opening bid at the auction was $200,000 per the notice the plaintiff’s (bank’s) opening bid was only $200. No one else bid, and the bank took the house back. The next one that came up, same thing. Published opening bid was $175,000, but the bank opened with a $100.00 bid. Sensing what was going on I bid $200.00 on a lark, they bid $500.00 I bid $800.00 – at which point the banks representative go visibly agitated, bid $175,000 – and needless to say, no one bid thereafter and the house reverted to the bank.

2. BayArea Follow Befriend (3) 49 threads 368 comments Oakland, CA

   2   7:30pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   EastCoastBubbleBoy says Sensing what was going on I bid $200.00 on a lark, they bid $500.00 I bid $800.00 – at which point the banks representative go visibly agitated, bid $175,000 – and needless to say, no one bid thereafter and the house reverted to the bank. LOL, I think you answered all my questions with the comment above. There is a reserve, they seem to tell you upfront (unlike typical auto auctions). I'm still wondering if a house can sell for below the published opening bid? Say that $175,000 house reached $170,000 for example.

3. EastCoastBubbleBoy Follow Befriend (11) 104 threads 454 comments Premium

   3   7:37pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   I suppose its technically possible, so far as I can tell. My understanding (IANAL) is that the bank has "right of first refusal” by being virtue of being the primary lien holder. You bid $170,000... why would they take it back for $175,000 pay the back liens (if any) and then be "stuck" with it for who knows how long. Anyone of you savvy patrick.neters ever seen this happen?

4. robertoaribas Follow Befriend (23) 55 threads 3,763 comments Scottsdale, AZ robertoaribas's website

   4   7:47pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   no right of first refusal, the bank can bid on the home, same as anyone else. they way it actually works, and its funny that we are this deep into a post on it with regular veterans of this blog who haven't read up on the process, is that the auction starts at the banks price. If this price is low, bidders will bid, if this price is high such as the outstanding loan balance, nobody bids, and it goes back to the bank. Sometimes banks drop the starting price at the auction. that is technically illegal here in az, the price that the auction starts has to be advertised 24 hours in advance, and if a homeowner ever gets pursued for a deficiency judgement when that was the case, they would have a very good reason to fight the deficiency legally.

5. EastCoastBubbleBoy Follow Befriend (11) 104 threads 454 comments Premium

   5   7:54pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   @ Robertoaribas. Thanks for the clarity. It must be slightly different out my way - but I'm going on my limited experience... not from what I've read.

6. KILLERJANE Follow Befriend (3) 12 threads 600 comments

   6   8:38pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   This is riskier to buy than an reo because of liens that could be present? Escrow and title can help determine any existing liens. No?

7. EastCoastBubbleBoy Follow Befriend (11) 104 threads 454 comments Premium

   7   8:47pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   Terms of auction I was at clearly stated that "all liens including back taxes are responsibility of winning bidder" and property "as is". Each state (if not each county) is different. I did do a cursory search on the properties over in the county deed room for those properties I was interested in prior to attending. There were back liens and back taxes owed on both of them. I get the general sense that if your not a cash buyer your SOL at least so far as courthouse auctions go.

8. robertoaribas Follow Befriend (23) 55 threads 3,763 comments Scottsdale, AZ robertoaribas's website

   8   8:48pm Mon 4 Jun 2012   Share   Quote   Permalink   Like (2)   Dislike   KILLERJANE says This is riskier to buy than an reo because of liens that could be present? Escrow and title can help determine any existing liens. No? A friendly title agent could find any prior liens easily enough, so that isn't your biggest risk. your biggest risks are: 1. the home has a serious defect. You don't get to inspect before a foreclosure auction, so a slab crack and settlement or a meth lab could be among your surprises. 2. the owners could still be there, and you would have to evict, which could take some time and money. they could strip the home in the process, maybe selling all the wires and copper plumbing, plus pool equipment and kitchen cabinets just for fun. they might trash the place just for fun too. I'm not against the courthouse, I've bought two homes there lifetime, but unless you have some inside info that gives you confidence to bid (in each of my cases, the homes were rented when they foreclosed, and I knew the renters, so I was able to examine the home.) then you are taking on big risks. Unless the price is substantially lower than you can find on the mls, the reward is not worth the huge risk, and in the last year, I haven't seen deals at the courthouse.

9. Dan8267 Follow Befriend (16) 761 threads 7,667 comments Boca Raton, FL Premium

   9   9:06pm Mon 4 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   robertoaribas says You don't get to inspect before a foreclosure auction I never understood why anyone would accept such a ridiculous condition. Have an open house where people can inspect the house and then auction it. Who bids on a house not knowing what condition it's in? There's a patsy in every game...

10. E-man Follow Befriend (31) 34 threads 2,543 comments San Jose, CA Premium

    10   12:14am Tue 5 Jun 2012   Share   Quote   Permalink   Like   Dislike   Protected   Bay Area, Ptiemann explained this in some other threads. Look under his screen name for details. I'm a little tired to get into this stuff.

11. BayArea Follow Befriend (3) 49 threads 368 comments Oakland, CA

    11   3:45pm Fri 6 Jul 2012   Share   Quote   Permalink   Like   Dislike   E-man says Ptiemann explained this in some other threads. Ptiemann, if you are out there and have the link handy, I'd love to see it. Thanks.

12. iwog Follow Befriend (48) 272 threads 12,450 comments 47 male Lafayette, CA Premium

    12   11:37pm Sat 7 Jul 2012   Share   Quote   Permalink   Like   Dislike   Protected   ptiemann says If trustee sales are now debated on Patrick.net, then that's a sure sign the game is over. I retired from it in August 2011, that was my last visit in San Jose. I hate to say it, but I'm pretty much done in Contra Costa as well. It was fun while it lasted.