WatchPatrick, firstly congrats on the book. I just purchased it on the kindle and wish you the best of luck w/ it.
Just wondering if anyone has bought a property at auction? If so, what are the pitfalls and is there any lessons learned anyone could share with me?
I am looking at a fairly new house that will go to auction in a couple of weeks. I have a limit of course which is on the low side but just thought I would ask around.
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Pitfalls? Where do I start & where do I end? How about you win the bid. You show up & the house is on fire? How about you show up & the whole house is gutted to the sheetrock? How about you find concrete in all the toilets? How about you didn't know that the 1st lien is subordinated to the 2nd lien, and you buy the 1st? Ready to kiss that cashier's check good bye?
Which county is the property in? How much does it worth? What's your max bid? Is it currently on the market as a short sale? How many loans does the property has?
If it's not in Santa Clara County, I cannot help you.
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Thanks for the response. I have fully inspected the house, I am a contractor and happy w/ the condition. It is fairly new and in Nevada county, CA. Currently it is owned by Chase, an REO property.
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If it is an REO, you should get clear title. Is this one of those auctions held by auction.com or marshallandhudson.com, or some thing similar where the winning bidder has to pay a 5% buyer premium?
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Barney_Franks says
This probably isn't a real auction. What generally happens is the winning bidder gets to negotiate with the seller and nothing is binding except your bid offer.
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Another point is that don't expect a good discount or any discount at this kind of auction because there is essentially no risk to you. They will even finance you on the spot.
To add to what Iwog said, there is typically a reserve price. If the winning bid doesn't meet the reserve price, the bank doesn't have to sell to you. They may contact the winning bidder afterward to ask you to up your price if the reserve wasn't met.
Good luck.
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Yes, Auction.com and Yes, additional 5% premium. I suspect you are correct Iwog but I don't know what there would be to negotiate except the price?
A friend of mine bid on a house and "won" it. 2 weeks later she was told she had been outbid and a realtor bought it for 1K more and flipped it.
I certainly have my doubts and seems transparency is elusive as ever!
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What do you have to lose? Just bid and have fun with it. If you win at the price you want, great. If not, who cares.
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Thanks Eman, Yes, I am not expecting a huge discount actually. There is a reserve that is undisclosed.
I will bid what I believe is fair market value, nothing more. Even the realtor who showed me the home said that the last time she witnessed an auction she believed there was fake bidders involved as "there was no way that many people had been interested in that house" quite an admission.
The only thing you can lose is a 5K deposit that is a hold on a credit card, that is you lose it if you don't close within a certain time frame.
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I just looked at a Sheriff sale property but wouldn't be interested because of condition. OK, I've been too lazy to do the research. Does anyone have any info on this type of sale? I'm in Oregon.
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Barney_Franks says
I don't mess around with these immoral "auctions" since they heavily favor the seller. Lots of people who don't know any better get caught up in the bidding, and if the price is low the seller doesn't have to honor it.
If you want a genuine foreclosure auction you'll need to subscribe to a reporting service like foreclosureradar.com. To make things even more confusing, auction.com DOES occasionally conduct legitimate trustee foreclosure auctions so you'll have to figure out which sales are the right ones.
Now there are serious risks involved in a foreclosure auction. Sometimes someone will get stung buying a worthless 2nd mortgage for hundreds of thousands of dollars only to discover they have no equity. There might be hidden tax liens, problems with the house, or tenants that will need to be evicted. At the very least, you should conduct a preliminary title search (you pay for this) and verify you're bidding on the senior (1st) mortgage.
Also remember a true foreclosure auction is 100% cash. auction.com does offer hard money financing, but the rate is a joke and I advise you stay away from it.
Good luck!
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i would never buy at auction other than trustee. its a total racket AND you compete with buyers who have financing.
if you really love that house and want to pay retain then its fine of course.
but if you want a discount and that is #1 goal focus on short sales first day of listing, contact agent direct (no buyers agent, ever)
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Iwog,
You forgot to mention that some bidders intentionally bid on the 2nd lien where there is a lot of money to be made. Also, some bidders intentionally bid on HOA liens, etc.
I'm just having some fun in a serious way. ;)
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E-man says
Down that path lies madness. ; )
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I have financing in place already and also have a limit I am willing to pay. But you are right Iwog, at the end of the day that can say "reserve not met" and pull it from the winning bidder.
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ptiemann says
This is what kills me. I've been to several of them. They end up paying retail plus 5% commission. It's like WTF were you thinking? You could have gotten it for 5% less. You have the time to do inspections and negotiate for a lower price. Instead of losing 5% commission if you back out and pay top dollar.
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ptiemann says
You said the key word, "faced". Because guys, for so many including some who post here, real estate is about "face", even more so now that the Bay Area has been flooded with newcomers from certain face-centric cultures.
I Lose My Face almost daily in the office(*) among my coworkers who reside in The Fortress (I don't reside in It), even though my kid got accepted to the same elite UC's that their Fortress Kids strive for. But I Lost My Face Even More when my kid chose to go to a CSU instead of the elite UC's, because the high demand major is not offered at the UC's.
(*) I Lose My Face out in the parking lot, before even entering the office, parking my beater looking (but well maintained) old car out front, among their Late Model Prestige Vehicles (you know the kinds). I might have a very low fixed cost for operating that vehicle, but I Lost My Face. To my coworkers, that is. Living outside The Fortress, my neighbors don't care about My Face.
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I have seen no good deals ever come out of any of those auctions... At the court house steps, bidding in cash I used to see good deals, but even that ended about a year ago, when an influx of new idiots drove prices up higher than those I could find by slugging it out on short sales...