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Buying at auction for Bay Area folks.

By FortWayne   Follow   Tue, 10 Jul 2012, 7:35am   2,297 views   20 comments
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I've seen a lot of posts here from Bay Area folks about how real estate there is expensive. And it is, seems like a bubble to me. Those prices are insane. So hopefully this will help out since auctions from what I remember where always cheaper than the flips coming out of them.

So this advice is how to buy foreclosures at auctions. Of course you do have to have all cash and should inspect the houses the best you can before buying. Every foreclosure won't be a deal, but who knows what happens out there.

The process:

1) First get the list of foreclosures. To get the list buy a local newspaper that publishes foreclosures, by law houses going into foreclosure have to be published in the newspaper for certain time period. Or alternatively go to auction.com, it's free but I don't know if it's up to date.

2) Once you pick out the houses, do your own inspection by visiting properties or talking to neighbors. If you can't physically inspect something, which is probably going to be the common case than just assume potential costs will be there and price them in.

3) Once you find something you like contact your county assessor to find out if there are any leans on the property. If I remember it right, in CA foreclosures all leans get wiped out except for unpaid state and federal taxes.
http://www.sfassessor.org/ is the San Francisco county assessor website.

3) Go to the courthouse steps and bid.

Hope this helps someone save some money out there. I still think real estate is a bad buy today since interest rates are at 0, and only way for it to go up is for banks to pay you to buy it. So please take all advice with a grain of salt.

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1. BayArea Follow Befriend (3) 50 threads 368 comments Oakland, CA

   1   12:55pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   Simple question... Can I purchase a foreclosed home at auction without 100% cash?

2. E-man Follow Befriend (31) 34 threads 2,547 comments San Jose, CA Premium

   2   1:16pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   Protected   BayArea says Simple question... Can I purchase a foreclosed home at auction without 100% cash? Simple answer. YES!!!

3. E-man Follow Befriend (31) 34 threads 2,547 comments San Jose, CA Premium

   3   1:17pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   Protected   Fortwayne, Thanks for the tips. :0)

4. BayArea Follow Befriend (3) 50 threads 368 comments Oakland, CA

   4   1:34pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   E-man says Simple answer. YES!!! Wonderful, would you elaborate? How much DP is typically needed at these auctions and are banks willing to work with buyers on this?

5. PockyClipsNow Follow Befriend 19 threads 1,534 comments Los Angeles, CA

   5   2:05pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   There are no banks involved. you will have to get private loans as far as I have read. from a hard money lender. I think rates are like 8-12% and they want probably 30% dp. Everyone varies of course. (funny thing about these private loans, the dp and the interest rates are 'totally completely non subsidized by the taxpayers' so they tell us where mortgage int rate/down payment SHOULD BE without the endless money funnel RE gets from the feds) Theres only one i can think of off hand the norris group. google him. auction buying is not for noobs. buy a 2nd lein by mistake and lose all your money. what about past due taxes and mechanics liens? u better add that up.

6. FortWayne Follow Befriend (13) 102 threads 3,764 comments

   6   2:35pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   BayArea says Simple question... Can I purchase a foreclosed home at auction without 100% cash? Typically you cannot get a loan, but I've heard that you can get FHA loans on Fannie/Freddie foreclosures. But I really never seen that, so not sure if that is even true. What I do know is you need a full amount at the courthouse steps. You can borrow money from a hard cash lender, but they charge like ptiemann said around 12% interest, so you have to make sure you can refinance which is hard if you are borrowing and might not have enough equity for bank to refi you. Ptiemann actually covered it well right above.

7. iwog Follow Befriend (48) 274 threads 12,546 comments 47 male Lafayette, CA Premium

   7   3:27pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   Protected   There are hard money lenders available for foreclosure auctions, but the practical answer is you need cash.

8. E-man Follow Befriend (31) 34 threads 2,547 comments San Jose, CA Premium

   8   5:35pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   Protected   Ptiemann and Iwog, You guys are so mean. You guys just broke someone else's dream. Just send them to hudsonandmarshall.com. Yes, they can get financing at those auctions. :0) Sorry, my bad. FortWayne was talking about auctions at the courthouse steps.

9. FortWayne Follow Befriend (13) 102 threads 3,764 comments

   9   9:22pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   ptiemann says FortWayne says If I remember it right, in CA foreclosures all leans get wiped out except for unpaid state and federal taxes. it's 'liens', and that statement is BS. Even water company liens can be enforced, don't ask me how I know. Got a question for you there ptiemann. You said earlier that you had a story about some Vietnamese man showing up at the courthouse steps with a lien on some money borrowed. That sounds like a kind of lien that would get wiped out at foreclosure auction in CA. Primary is still the main mortgage. Or am I missing something, giving out somewhat incorrect advice?

10. HEY YOU Follow Befriend (4) 334 threads 919 comments

    10   11:23pm Tue 10 Jul 2012   Share   Quote   Permalink   Like   Dislike   At foreclosure auctions, does the bank have the wet ink mortgage & wet ink promissory note in their possession? If not, could this a problem ? HMMM? Buying a REO & receiving title insurance does the title company verify that all recorded documents are legal? HMMM?

11. robertoaribas Follow Befriend (23) 55 threads 3,795 comments Scottsdale, AZ robertoaribas's website

    11   12:54am Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   ptiemann says Regarding the $ amounts, I am not sure any more. I think the following happened, in this order: 1) man purchases house with regular loan. Let's say the lender is CITI ('C'), $300k. a few years go by 2) man makes loan contract with Vietnamese bank ('V') and pledges the property as collateral. He promises to repay and gives them a deed of trust to secure the promissory note. Supposedly V does not have a branch here in the USA. Therefore, V does not record their deed of trust with the Santa Clara Recorder. 3) now he refinances the CITI loan (1st position). The $300k will be refinanced with a $450k loan from BofA. Title company does a record search, says fine, just the $300k loan is open. They pay off CITI loan (which was in 1st position) and create a new loan of $450k (which is now BEHIND the Vietnamese bank's loan) TOTAL AND UTTER BULLSHIT! The order of a loan is based on when it is recorded. ALWAYS! PERIOD! [except for mechanics liens for work done on the house, which can have their date set to when obvious work was done on the house, and property tax liens...] so, NO your facts are completely incorrect, what you are describing can't happen. If the Vietnamese bank didn't record their lien, they are by definition last, and are wiped out in the foreclosure auction... Seriously, why do people on this site write as if they know what they are talking about when they haven't got a clue? read up on real estate law for a few hours then come back...

12. E-man Follow Befriend (31) 34 threads 2,547 comments San Jose, CA Premium

    12   8:42am Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   Protected   Peter, I saw that a couple of times & passed. However, there was one time that the "supposed" 1st lender forecloses, but it was recorded after the 2nd so I passed too. It looks like the guy got it for a good price. I was seriously thinking about buying it though. In hindsight, I should have gone for it based on what King Side said. Starting bid was $117,500, and the guy got it for a penny iver. There was a $70k on the second. FMV was $175k-$180k. Typically, the regulars would bid this property up to between $133k to $139k. I saw Akimax paid $164,200 for a property in April. Now it's on the market for $220k. We bought an identical unit in the complex through short sale for $155k in May. We're still happy about that. :0)

13. E-man Follow Befriend (31) 34 threads 2,547 comments San Jose, CA Premium

    13   8:49am Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   Protected   TOTAL AND UTTER BULLSHIT! Roberto, I think ptiemann is warning them of the potential risk. It's not always cut and dry. My coach almost bought a 2nd because the title officer overlooked and missed the subordination agreement. It was a good thing he caught it that morning before heading out there. People are more than welcome to do whatever they want with their money. That's the beauty about this site. A lot of miss information, speculation, and conspiracy theory. Gotta love the craziness going on on this forum. :0)

14. BayArea Follow Befriend (3) 50 threads 368 comments Oakland, CA

    14   10:14am Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   ptiemann says The private/ hard money is not helpful to buy a property at auction unless you already own other real estate to borrow against. Nobody will give you a loan secured by the property that you will be bidding on. You need to borrow against your existing RE portfolio. ptiemann says 100%. You need to bring cashier's checks with you. PockyClipsNow says you will have to get private loans as far as I have read. from a hard money lender. I think rates are like 8-12% and they want probably 30% dp. Everyone varies of course. Thanks guys, the above is what I was looking for. Back to MLS for me :-/

15. robertoaribas Follow Befriend (23) 55 threads 3,795 comments Scottsdale, AZ robertoaribas's website

    15   10:29am Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   Ptieman: Order that the lien is recorded is all that matters. If the bank or title company misrecorded them, too bad. They had at least a year to fix that if they cared to. But, as far as warning people about the risks at auctions, I 100% agree. That is a no bs cutthroat business, with the scummyiest sharks one could ever see. The people asking naive questions don't have a prayer of succeeding, someone will offer to help them, it will be a scam, and they will lose alot of money.

16. CDon Follow Befriend (1) 218 comments

    16   10:51am Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   robertoaribas says Ptieman: Order that the lien is recorded is all that matters. . Not necessarily. It really depends upon the laws of the particular state and whether they can be categorized generally as (a) Race (as in race to record), (b) Notice (as in actual or constructive notice) or (c) Race/Notice. Take Ptieman's case of the Vietnamese bank (VB). He was correct in that it would have made a difference if VB had a representative show up at the courthouse steps. In a Notice or a Race Notice state, this would likely constitute actual or constructive knowledge such that the winning bidder could not be a bona-fide purchaser (legally important concept of a BFP). As such, the VB would have a claim that would survive the foreclosure auction despite the fact they had not recorded their lien. Also, while there are a few states that are Race only, the vast majority of states can be classified as either Notice or Race/Notice. Therefore, it is incorrect to say that recordation is the end all be all as to what liens will/will not survive a foreclosure sale.

17. robertoaribas Follow Befriend (23) 55 threads 3,795 comments Scottsdale, AZ robertoaribas's website

    17   1:37pm Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   Question is about California, which like Arizona, is an order or recording state. For reference: http://www.brewerfirm.com/articles/article-whosonfirst.html Even in that example, and even if this happened in a Notice state, the VB would have to be able to PROVE that it gave constructive notice to the buyer of prior lien status, merely standing around at the auction wouldn't suffice by any means at all. They would have to let the buyer know BEFORE the buyer bought the property. Constructive notice is generally considered satisfied by FILING IT WITH THE RECORDERS OFFICE, so even if they told the buyer verbally, the buyer at a bidding auction would have every reason to not believe them, thinking it was a ploy by another potential bidder, and it would be very unlikely to stand up in court. And as a final thought, since California like Arizona is a trust deed state, what would happen in this case, is the trust sale would be reversed. Once in a great while the owner files bankruptcy which also stops the sale, and you get your money back. The trustee has to be able to complete the sale, so the problems would all fall back on them, not the buyer in any of these examples.

18. CDon Follow Befriend (1) 218 comments

    18   4:43pm Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   robertoaribas says Question is about California, which like Arizona, is an order or recording state. For reference: http://www.brewerfirm.com/articles/article-whosonfirst.html Order of recording alone will not cut it as California is a Race Notice state. Your reference is about mechanics liens which (like some tax liens, certain attorneys fees, DIP financing, etc) do get superpriority. Yet thats not the issue here as we are talking about a simple second that went unrecorded. Even in that example, and even if this happened in a Notice state, the VB would have to be able to PROVE that it gave constructive notice to the buyer of prior lien status, merely standing around at the auction wouldn't suffice by any means at all. FYI, I gave you the very condensed version of what constitutes notice when determining a BFP. A more nuanced version of what constitutes notice would include all 4 types of imputed notice, particularly inquiry. And yes "merely standing around" can be enough to necessitate inquiry, depending upon the specifics of the facts in the particular case. Bottom line, dont get me wrong here. Your advice is generally sound and better informed than most of what I see on this site. And yes, in the vast majority of cases, recordation is all you need to worry about, and I would bet every single person here could engage in a lifetime of buying foreclosures without having to worry about anything more than what they see on their lien search, and perhaps, their schedule B exceptions to title in their policy. Still, when someone speaks in absolutes (i.e "The order of a loan is based on when it is recorded. ALWAYS! PERIOD!") its helpful to point out when that is factually incorrect.

19. robertoaribas Follow Befriend (23) 55 threads 3,795 comments Scottsdale, AZ robertoaribas's website

    19   8:38pm Wed 11 Jul 2012   Share   Quote   Permalink   Like   Dislike   CDon says Order of recording alone will not cut it as California is a Race Notice state. sir, you are incorrect. You might actually try reading the California Civil Code, article 4, priority of liens... sections 2897 to 2899

20. CDon Follow Befriend (1) 218 comments

    20   5:56am Thu 12 Jul 2012   Share   Quote   Permalink   Like   Dislike   robertoaribas says CDon says Order of recording alone will not cut it as California is a Race Notice state. sir, you are incorrect. You might actually try reading the California Civil Code, article 4, priority of liens... sections 2897 to 2899 Statutory construction of 2897 is the start point. The end point is how that statutory language is interpreted in CA courts. CA courts have come down on the side of race-notice http://www.mellorlawfirm.com/legal-news/two-deeds-of-trust-neither-was-recorded-first-a-primer-in-the-law-of-priorities-or-californias-race-notice-statutes/ If you have acess to Lexis or Westlaw, Miller & Starr is a fairly good treatise.