Need Help On Purchasing At Courthouse Steps!!!
Hello everyone,
Here is the situation. I have been to my local county courthouse where they have foreclosure auctions daily. At this auction, there we 15 properties for sale. Only two of them were bought for about $500.00 over the outstanding loan amount. The rest sold to what looked like a bank rep who paid $100 on each of these properties and had a stack of files with him.
My question is this. If a property has an outstanding balance of $50K owed via the loan being foreclosed. The FMV is 85k. Can you offer 40K at the auction?
Technically I know you could, but, will the guy in the suit keep bidding until he reaches the outstanding balance for the bank? Or is their some formula/rule of thumb, that says you can safely bid X percentage under the amount owed and have a chance of getting the property?
Obviously the guy in the suit could not have bought all those properties for $100 each or everyone would have bought one.
But no one bidded against him, either the newbies like me, nor the people who looked like seasoned pro's and they all knew each other.
Thanks for the help!
tufter,
When you purchase at the foreclosure auction, then you should find out all the information on each of the properties before bidding. Determine what the most you are willing to pay for the property is (i.e. 20% below market value). When the auction starts, the opening bid is the lowest the bank will accept...so you cannot bid $40K if the opening bid is $50K.
The man in the suit is the bank's attorney and he is only there for one reason...to try and get as much money for the bank as possible. Therefore, he will keep increasing the bid. The bank tells him the minimum amount they are willing to let the property go for at the auction. If the bid does not reach the price set by the bank, then the attorney will bid high enough to win the auction. The property then becomes a bank REO.
I hope this helps answer your question.
Tanya[ Edited by tanya1215 on Date 07/11/2003 ]
As Tanya1215 says . . . "you should find out all the information on each of the properties before bidding. "
For unseasoned investors, buying properties at the courthouse auction can be considerably risky. There are certainly easier and more safe options to get started buying real estate. Keep studying, ask lots of questions and go out and make smart investments.
Best of Success!
BAMZ
I have a related question and would appreciate any insight. A property I really, really, really want (for my own homesite, actually) will go to auction on July 21. The owners have been non-responsive thus far, so it looks like I may have to go to the courthouse. I already know the opening bid is going to be more than $128K (note is for $120K, but this is third time property has gone to foreclosure, and opening bid last time was $128K). House in current condition is worth about $90K because of EXTENSIVE rehab that will be needed.
Since a short sale is unlikely, I was wondering if anyone knew whether or not after the "guy in the suit" takes possession with the high bid, can you still negotiate the price down with the bank's land division? The advantage of not bidding is that the property will take about $30K in rehab (needs new well, extensive cosmetic/wood rot repair and two new heat pumps, minimum). With that kind of rehab needed, I would end up spending $150K-plus for a house that ultimately in move-in condition would sell for about $135K. I know, I know I should walk away as an investor... but first I want to know what you think the odds are of the bank's selling it to me for $90K-$100K afterward (don't laugh, I've never done this before).
By the way, what's an REO?
Thanks for any input.
noah
Yes ....What is a REO. And a real-estate agent I work with sells BANK REPO'S ......how does the real-estate agency get them....she says she works through a bank. Are these the ones not bid on?
-carney
A bank REO (Real Estate Owned) is property that the bank owns. After the foreclosure auction, if the bid was not high enough, then the bank will outbid everyone to keep the property. The bank then lists the property with a realtor as a bank REO. You can negotiate the price of a bank REO if you create a business proposal that outlines why you are offering the price you offered.
For example, noah stated there is a property that is going for $128K, but the note is only $120K and the FMV is $135K. You can negotiate with the bank concerning the price. After the auction, ask the "man in the suit" what is going to happen to the property now. Tell him you would like to buy the property, but due to the amount of repairs needed it is not worth the opening bid. Ask him if you can submit an offer to the bank for the property. If he says yes, then ask him for his business card so that you can submit a proposal to the bank that will include everything they need to make a decision concerning your offer.
It never hurts to ask...
Tanya
the bank starts the bid @$100.00 to obtain a defiency against the owner. if they owe 50k and the bank is the successfull bid @ $1000.00 they would be a $49k deficiency against the owner...the bank would keep bidding to the 50k mark if there was competition. Investors that know the upset amount wont bother bidding at all if the numbers dont make sense. ie house is worth 40k the mortgage foreclosing is owed 50k....
One question I have concerning this matter is this. I have a list of REOs from last month's auction. It basically has the property address, assesed value, balance owed, and bid price. One example is a property assessed at $720k and the highest bid was the bank at $20k. Does the bank make an immediate profit if it bids lower than what is owed?
If you bid at auction and win, arent you responsible for anything on that property? ie 1st mortgage, 2nd mortgage etc. they are not wiped out like they are if the bank takes them are they?
Tim
GO TO THE OFFICE AND GET THE LIST AS SOON AS THE LIST I OUT-WRITE THE OWNERS-THE BEST IS GO TO COURTHOUSE AND OBTAIN THE LIST WHEN THE FORECLOSURE SUIT IS FILED (3-6MONTHS BEFORE THE AUCTION) BY THE ATTORNEY (MAN IN THE SUIT). YOU AND ME ARE OUT TO PUT THE MAN IN THE SUIT OUT OF BUSINESS! WE ALL KNOW THERE ARE TO MANY PROPERTIES FOR THAT BUT A GOOD THOUGHT!
SO GET TO THEM 1ST-3-6 MONTHS BEFORE THE AUCTION!
ralph
halstedcw:
why would you think that the bank would make an immediate profit??? if you lent someone $100 and had to sue them in order to recover $20 - - $80 less than you lent them - - did you make a profit???
The bank is only looking to recover its money (principal, interest, court costs, attorney's fees and preservation costs). Any money over and above the bank's costs (assuming no other liens) would go to the borrower by law. After the property is taken back by the bank, it can sell it for whatever the market will bear.
Just a thought for people in different states...
In Ohio, at sheriff's (foreclosure) auctions, there are no "$100 bids" for a $100,000 property. The minimum bid by law is 2\3 of appraised value.
On a $99,000 house, the opening bid must be $66,000.00.
In my town, it is rare when the "man in the suit" shows up. It seems that many of these lenders are from different states and don't seem to bother getting a lawyer. It already has to start out at 2\3 of the appraised value, regardless of how much is owed to the bank.
States are different. Keep this in mind when getting advice here.
Good luck to everyone in all of your dealings...
OHhouse
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On 2003-07-12 11:07, noah wrote:
I have a related question and would appreciate any insight. A property I really, really, really want (for my own homesite, actually) will go to auction on July 21. The owners have been non-responsive thus far, so it looks like I may have to go to the courthouse. I already know the opening bid is going to be more than $128K (note is for $120K, but this is third time property has gone to foreclosure, and opening bid last time was $128K). House in current condition is worth about $90K because of EXTENSIVE rehab that will be needed.
Since a short sale is unlikely, I was wondering if anyone knew whether or not after the "guy in the suit" takes possession with the high bid, can you still negotiate the price down with the bank's land division? The advantage of not bidding is that the property will take about $30K in rehab (needs new well, extensive cosmetic/wood rot repair and two new heat pumps, minimum). With that kind of rehab needed, I would end up spending $150K-plus for a house that ultimately in move-in condition would sell for about $135K. I know, I know I should walk away as an investor... but first I want to know what you think the odds are of the bank's selling it to me for $90K-$100K afterward (don't laugh, I've never done this before).
Yes, you can buy the property from the bank. they may put it on the market at a lower price to get some bids. they also might put in on the market and let it sit there. (I have seen it happen...) They also might have a clean up crew go in, and make some minor cosmetic repairs to help the sale process along. Once the bank owns, it is all a crap shoot on what they do.
Good luck
Derek