Foreclosure in Greenwood>Question Details

Indymill, Home Buyer in Greenwood, IN

Why would Wells Fargo out bid me at the Sheriff Sale?

Asked by Indymill, Greenwood, IN Fri Feb 17, 2012

The judgement on this house was $ 360,000. The opening bid started at $ 235,000 and my top bid was $ 285,000 and the bank came back at $ 291,000 so I lost the auction. After the sale I approched the banks lawyer and asked what their top dollar was for bidding and he said they would have went to $ 385,000. I am confused why when the house on the market right now may only be worth $ 300,000, Why did they outbid me and why would they spend so much to get this house? Is there anything I can do to get it besides waiting for it to hit the market? I really need help and really want this dream home for me and my family. Please help!

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ejajh2’s answer
The banks send bidders to buy the house at sheriff sales to make a profit. If the lien is $300,000 and the house is worth $360,000, the bank will bid to win the house to flip it. If the previous owner owed $300,000 and they can get it for under that, they will buy the house because the difference in what they paid versus what is owed allows the bank to recover the difference from the previous owner. Once winning a house, they will turn around and make small repairs and then put it on the market for full market value to sell. So, if $300k is still owed and lets say they get it for the $385k, they show the previous owner paid in full and now they own the house outright. Then they sell the house for $360,000 in a few months, so in the long run, they made $360,000 (selling price) minus $25,000 (overpaid at auction) plus $$$$ (monthly mortgage and interest from previous owner for however long they owned the house). So the shorter period of a lender holding the mortgage they will buy cheaper than lien at sheriff auction however, according to the numbers, the longer they hold the mortgage the more they will pay for it at auction.
0 votes Thank Flag Link Wed Nov 28, 2012
BEST ANSWER
Indy,

We're sorry for your frustration and bad auction experience. The bank's representation did exactly what they are coached to do at auctions....an that is to not let the property go for anything less that the debt that is owed to them. The $385,000 is obviously the amount owed plus legal fees, liens, processing, etc.

The sad part of this is that you were willing to purchase the home for $285,000. The all together too often scenario is that the bank later sells the property as a foreclosure for less than the amount the they could have recognized by taking the earlier offer.

The best advice is not to get too involved trying to understand why banks do anything. Many decisions defy logic, common sense, or any resemblence to good business practice and could cause normal people to start talking to themselves.....

Bill
1 vote Thank Flag Link Sat Feb 18, 2012
its simple. The bank will earn much more then they paid from the mortgage interest. Just like when I offered to buy a $450,000 house for $450,000 cash they declined me and sold it to a couple who was barely approved for $400,000 but with out the pre-payment option. Banks are all about the long term profit. Sorry.
0 votes Thank Flag Link Wed Jun 12, 2013
My mom lost her house, she owed 97k. it went to sheriffs auction. I bought the house for 77k. I knew the house was in great shape other than the roof which is now being replaced for 7k. The house is worth 130-140k. screw the banks, figure out a way to come up with the cash to buy it and let them foreclose on it. you will get it cheap at the auction
0 votes Thank Flag Link Fri Mar 8, 2013
Indymill although most REO properties come to the market with an REO agent, If I were you I would try and get hold of the REO and asset manager department of Wells Fargo that has your property. Although many on here will tell you can only purchase through an REO agent that is not always true. I know people who were persistent like you and were able to buy from the bank directly. Your $285,000 bid may no longer be valid. However, if you are able to connect with the right people in that bank maybe you can work it out?

There are no guarantees or promises, just some experiences I am passing onto you. Larger banks like Wells and Bank of America usually will go the REO route. If that's the case find the agent who will represent that property, and stick to them like glue.

I am very sorry to hear your story as I hear it all too often. I equate banks like politicians, why would you take a mediocre pay unless you were going to be rewarded 10 fold. I'm afraid the real world is ALL about money and Bankers are notorious for getting the most they can. Otherwise why do they pay you and I less than 1% interest on our accounts.

I respect your persistence and good things come to people like you, hang in there.

Rob :-)
0 votes Thank Flag Link Sun Feb 19, 2012
Bill,

Thanks for your response! You really put it into perspective for me since I have been talking to myself for a few days now :) It really has been driving me crazy and I know I will never get a good enough answer to justify why the bank took my dream home away from me. I guess all I can ask now is what can I do to get it????? Is there anything I can do???? I was just going to wait until it hit the market and have a realtor put in a cash bid with no contingencies if the price is within my original 285,000 bid and hope that they accept! Any advice on how to proceed?

Thanks Again, I truly appreciate all the feedback from everyone.

INDYMILL
0 votes Thank Flag Link Sat Feb 18, 2012
Rob,
Thank you for your response! It was very helpful to read your reply and try to understand why they do what they do. I didn’t mention it but the home I am interested in was to be auctioned off last year in August, so you are correct about them pulling them out of the auction and collecting their funny money from the government. I have spent endless hours doing my homework on this home and I was confident in my findings to proceed with a cashier’s check for $285,000 to purchase. I had a title search done by a title company, I researched the court records myself to cross reference with the title company’s findings. I went as far as pulling the plat from the recorder’s office to look into easements. Also, in my findings I located all the previous owners, which were only two, but one of them did rent it out. I found the renters on facebook and looked threw their public photos of them living in the property. I know where they all live, their numbers, ect. Defiantly not a lack of research on my behalf. And this property is now an REO since Wells Fargo outbid me at the auction just hasn’t hit the market yet. Thanks for the luck; I sure do need it to continue my quest for a way to get this home.


INDYMILL
0 votes Thank Flag Link Sat Feb 18, 2012
Christine,
I feel better knowing I am not alone trying to understand this whole mess; however I am unable to change my expectations on the home of my dreams as suggested. I am currently looking at every home on the market not just bank homes. Unfortunately the home that meets my requirements as to what I am looking for to live in the rest of my life happens to be bank owned now since I lost the auction. I currently own and I am not willing to just settle as it wouldn’t be fair to my daughter since our main reason for moving is for better schools and a little bigger home. I would choose to stay in our home now and put her into a private school than to move into something that I don’t see myself wanting to live in just because it seems like the best deal ever.

I do appreciate the feedback, Thank YOu!
0 votes Thank Flag Link Sat Feb 18, 2012
Indymill, you raise a lot of good questions. Simply put the lender can make more money between re-selling the property, writing off losses, getting ridiculous amounts of money from Private Insurance type companies, getting their hands on any government funds like TARP funds.

Banks are not in business to lose money and trust me the old adage of lenders don't want to own real estate is not true today. They may not want to keep them and rent them out but they sure do want the properties back at the auctions. I know of 5 properties that went the way yours did. other times the bank pulls the property back on the auction day. Unless we can chat with the banks asset manager we will never know their actual reason, other than not to lose money.

That way they can take their losses, fix-up the property or wait until timing is better for them. This is the reason why they take so long completing short-sales, or very few loan modifications are approved. If you have your heart set on purchasing these kinds of properties Indymill, go after the REO's. These are properties already taken back and on the market for resale. Most lenders prefer owner occupants top investors. Besides unless you have done your research and homework, you could get stuck paying off other liens at a sheriff sale. Proceed with caution, please.

I hope it all works out for you,

Rob
0 votes Thank Flag Link Fri Feb 17, 2012
Indymill, There really isn't any common sense to what the banks do. There are alot of foreclosure opportunities on the market. You have to be willing to change up what you want in a home to take advantage of them. We've all seen banks turn down offers and then sell homes for tens and hundreds of thousands less. They may have appraisals or BPO's to support their bidding price. It doesn't really matter. Trust me, we're trying to make sense of it too.
0 votes Thank Flag Link Fri Feb 17, 2012
Thanks for your response Joe. I still don't see that being the case unless I missed something. The same bank "Wells Fargo" bought back another house a few months ago for $ 280,000 at the Sheriff Sale but just listed it for $ 170,000. This isn't the only example I have seen there are many more to compare their price in which they paid to what they have it on the market for now and it just doesn't make sense to list it way below what they payed for it. However, you are the broker and I am just a buyer trying to make sense of how I lost it and how I can still get it.
0 votes Thank Flag Link Fri Feb 17, 2012
Apparently the bank felt that it was in their financial interest to buy the house at $291,000 and put it on the open market. I expect that the Broker Price Opinions done in their behalf showed that there's money to be made in doing so.

Good luck.

Joe Shoemaker
Principal Broker, REALTOR®
MacDuff Realty Group, LLC
317 413.8501
joe@joeshoe.com
http://www.facebook.com/joeshoe
http://twitter.com/#!/jojosmojo
0 votes Thank Flag Link Fri Feb 17, 2012
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