Banks Accepting Bids Below What's Owing At Auction???
I was speaking to someone claiming to be a former REO officer about minimum bids at foreclosure sales and he said this:
At foreclosure aucitons, lenders are free to accept bids of less than what is owed on the note.
Is this true? If so, is this very common? If it's true, why would the banks repossess the homes and take title to them as REO's? It would seem that they would simply unload the house at the auction for whatever discount they so choose, and then avoid the cost and trouble of repossessing, repairing, listing and selling the home as an REO.
Your thoughts on this are appreciated.
Thanks!
Martin
I do have a friend that does this often, but he is in a very small town and he knows the attorney so they send the offer up with the paper work. Not something I would think to be a regular thing, but give it a shot.
Sire
Yes they can and do accept less than what is owed.
The reason is what they perceive the value of the property to be. They know that if the home is over leveraged, and they take the house back at auction, they are going to spend more to market and sell the house.
Countrywide called me at 8:40 at night the night before the auction. I had been trying to get them to short sale. They drug their feet, and after reviewing my email pictures of the property, agreed to give in. They asked me if I would go bid and the property, and told me what number they would take. All I had to do was be the second bidder from the lawyer, state the number, and bang, it was mine. AND, I did just that.
I don't believe it is VERY common, but it does happen. The bank always have a number called a "stop loss". This is the lowest from what they are owed that they will go.
Most times, the bank doesn't really know what is wrong with the house, or its true market value. I often find that their BPO is a drive by from a realtor that wants the bank to take back the house so they can sell it. i.e. just last week a house that needs 17K in repairs to be liveable, and looks dumpy from the outside, but their BPO came back with the move in condition, landscaped home of 78.3K in a 72K neighborhood. This is no joke, and the bank will not let me send them pictures. I am sure there are other reasons the banks take REO's but this is just one that I have experienced more than once.
Dear Martin,
It depends on the economics of the time. In the long distant past we even had arrangements with the REO or Loss Mitigator to buy the properties at the sale and the bank would give us financing after a 20% downpayment bid at day of foreclosure. That stopped.
On todays market the REO's are beginning to be a little more reasonable. After all it is a run away market at this time and almost anything will sell way over its normal value.
Today at a foreclosure sale the property came back for about twice its true value. 2 br 1 ba about 780 sq. ft. in a so so spot in the valley. The winning bid was $410,000 all cash at the foreclosure sale. The unpaid bal on the first note was $210,000 they zoomed past that mucho rapido.
Yes it does need work about $15,000 if done with great care. The buyer who does not speak English very well made all his money in hot cars. A relative is moving in. You just stand there at the Foreclosure Sale. So many bidders.
But experience teaches me just to stand around and all it takes is for Greenspan to kick interest rate up a half of a point. He really hates to touch the housing market it is about the only thing that is really rolling. So in the meantime we play another game. Buy prior to sale. Record Deed. fold hands and wait.
The ultimate test of a Real Estate Investor is to be ready for any market. He should be able to do many things. Like just fold your hands.
Oh guess who recorded a Grant Deed one day prior to sale?. Lets see the bidding began at $210,000 over 10 Real estate Investors bidding. All of that overage bid goes back to the present time owner that would be $410,000 minus about $210,000.thats the amount due at foreclosure. Yes that is about $200,000 overage bid. The old owner got $1,500 for the deed. About $100 for notary, recording etc. gasoline http://www.etc.Not bad. Thats the play on a run a way market. I call it Folding Your Hands.
Cheers, Lucius avec Folded Hands
8-) 8-) [ Edited by Lufos on Date 03/25/2004 ]
[quote]
On 2004-03-25 20:13, Lufos wrote:
Thats the play on a run a way market. I call it Folding Your Hands.
Lufos,
What do you do if you live in a market like mine where the properties values are not rising that rapidly and the houses are appreciating 2-4% per year in a market that has an average home price of 120k??
Thanks
J
I would start wearing a necktie, and conforming with the economics of that area. Indeed I wish I were there as this is a bit weird even for me.
There are people pouring in here from all over the world. Some with money. Could somebody tell me how the hell you get money out of Iraq? I mean big money.
I live in a rather low income area. The houses have increased so much that very few can buy and those that do are going into harms way. One half the income for mortgage payments.
There is a run down apartment house down the street now vacant as they have slowly evicted all tenants. Just sold, I met the man I translated for him cause he got a ticket for not having any plates on his nice new Mercedes and he could not understand why.
In any case he is converting this building into 4 really large units. about 3 bedrooms 3 baths each all this for his extended family. It will now be fenced in and automatic electronic gates for in and out of cars. The fence will have a little buzzer and a camera so he can look at all who would enter. Eight Unit two story apartment house now a 4 unit and lots of underneath parking. They will paint and prime and turn it into a little fortress. I asked him what he does, he smiled and replied "I handle things."
Do you think he is one of us? Man has capital cause all this is not done for peanuts. It is totaly non conforming for the neighborhood. Why would he live in a semi slum when he could do better just about anywhere else? His accent is high class educated Sunni Arabic, Comes from Bagdad, speaks French went to the American University in Biruit, Lebanon, and is learning Spanish. Dresses a little Calif. I wish him well.
Lucius
yes, Lufos, that guy is seasoned for sure, one of the beauties of growing older, I welcome it...
So many questions, so little time.
1) What is the difference between a grant deed and a warranty deed?
2) Lufos, how do you find such incredible deals? I believe your market to be much more competitve than ours. Filled with investors faxing, e-mailing, calling, sending roses, small cars, etc. to the people in pre-foreclosure to get them to deed their house over. Was no one else able to reach this guy? It seems whenever I get in contact with someone in pre-foreclosure (particularly that close to the steps) they have a pile of letters the size of Mt. Rushmore from investors "ready to pay cash" for their house that I have to climb over to find them. Obviously, my list may be the problem. Any ideas?
JohnCl
Grant Deed - document which legally transfers title to real property to the new owner.
Interesting!
Warranty Deed - provides that a person granting deed (seller) agreees to defend the title from claims of others.
So I am assuming in this case the person who had recorded the Grant Deed had offered to "take over the deed" and then benefitted from the increase value at sale.....
hmmmm
Nice move Lucius, I am impressed as usual.
Generally a lender willing to take less than owed at the sherifs sale is saying that they know they are going to take a bath sooner or later and decided to take their bath now.
If you can get to such a lender a little earlier in the process they are prime for a short sale. If, like Lucius you can also get a quit-claim from the mortgagee you are in a very sweet position. Withdraw your claim as lender, acknowlege the title holder and avoid the sale.
or foreclose on seconds, and other juniors and get clear title.
Mark