Do Home Owners Get Overage At Auction?
I attended an auction on Monday.
This womans husband walked out on a wife, 3 kids and a house worth 150k and the first mortgage was only 42k and 5k back taxes and water and sewer.
They had bought the house a year ago for 132K.
I attended, check in hand fully expecting the bank to call it of because of someone coming to the rescue but it didn't happen.
The house was in great shape nice and clean.
The place sold for 115K to a local realtor that must know more than me (or maybe not).
My question is does the bank refund the overage to the home owner as I was told?
If this is so what would the insentive be for the home owner to sell at a deep discount at preforclosure other than credit rating if I were to have aproach them?
Thanks in Advance
JohnNH
Thats a good point, and I would like to know the answer to this question as well.
Why would the seller be motivated to sell the property at deep discount, if there are reasons to think the property will sell for more at the auction? I realize there are no guarantees, but in this market its worth the risk, aside from the foreclosure on your credit report.
Vasiliy
That bank most certainly owes them the overage, but many owners in foreclosure do NOT realize this. There is money sitting there for them.
First off, take a look at this example.
1) Buying a 150k house for 115k is buying at a deep discount. At least for some people.
2) If you can avoid the foreclosure, you'll have saved a major hit on your credit report.
3) The whole foreclosure processs is costly. If the homeowner can sell the house for 115k instead of letting the house sell for 115k at auction, which way do you think the seller will get more money? How much sooner?
4) Chances are, they will be able to sell for more than what the house will bring at auction, because the buyer will have some time to make financing arrangements. Not the same as arranging for certified funds to bid at an auction.
Yes John, the lady gets the difference. In two or three months. But she also gets to pay the banks attnys to foreclose on her.
And, had she been smart, she could have sold the house for $140,000 three months ago at retail.
In addition, up until the last few years when the foreclosure auctions became so crowded the amount of discount at the sale would likely have been more.
I thought that paying 115k for a house that is worth 150k, paying the 5k mentioned for water sewer and taxes (now up to 120k), then carrying costs plus closing costs on both sides of the deal, this looked skinny.
JohnNH
And I almost forgot the cost of removing the previous owner.
Are you saying the mortgage lender had a bid in at approximately $42,000 plus $5,000 for taxes,etc.? Who else was there running the bid up to $115,000 with that local realtor? Or did the lender begin the bid just under that $115,000 because they knew the value of the property? Is it possible there were other mortgages, judgments or leins on the property? At the local foreclosure auctions it is rare for anyone to even show up at all and the County Trustee appears to be on the courthouse steps talking to himself as he reads the paperwork and asks for any bids.
I have been trying to get a foreclosure but a short sale wouldn't work because the 1st is around $82,000, the 2nd is around $43,000 and there are other judgments totaling about $26,000 more. The appraisal is only $103,000 and a lot of properties here are advertised below appraisal. It will have to go through foreclosure to wipe away the judgments and one can only hope the 2nd doesn't care enough to show up.
Enjoy.
The bank tried an oppening bid of 125k but someone started it at 50k
The mortgage was for 42k and there were 5k back taxes ect.
No other liens.
3 different bidders all known to have no affiliation with the bank.
I was told she thought her "rich sister would bail her out" it never happened.
Every auction I have been to in the last year ( about 6) have had 6-12 registered bidders.
Just before the auction the president of the bank (small town) went inside the house to see if they could work things out.
He also must have explained to her that it would be in her best interest to allow the house to be viewed considering its great condition and that she would recieve the overage.
JohnNH