Home Buying in 95404>Question Details

Renting Woes, Renter in 95404

So many of the more reasonably priced listings are up for "Auction" what does this mean for the average buyer?

Asked by Renting Woes, 95404 Mon Oct 31, 2011

Does this mean the house is only available for cash? What if you are pre-approved for a loan? Can you use the loan to purchase the auctioned home?

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6
Larry Tollen’s answer
Auctions are simply another marketing tool and you should be wary. Tpo begin with many are not absolute auctions in other words the Seller has the right not to accept the winning bid. Secondly nearly all auctions have a 10% buyer premium in other words if your winning bid were $100,000 you would have to pay $110,000. At an auction you will be required to make a 10% non-refundable down payment if you are the winning bid and typically close within 2-4 weeks so if you're getting a mortgage you'll want to speak to your loan officer in advance to make sure they can comply with the auction terms.
0 votes Thank Flag Link Thu Jun 28, 2012
Yes, you can use a loan to buy "Auctioned" homes. However don't let the offered price fool you. If the price looks too good to be true, it is. I have attended several of these "Auctions" with buyers of mine. I warn them, however, not to expect the home to sell for anywhere close to the low offering price. Here is why. To begin with, the low price is designed to bring many people to see the house before the "Auction". This is simply a clever way to get many people familiar with the house quickly as a marketing gimmick. Lots of people come through during the week or two before the auction, with high hopes. Read on, and you will see why these high hopes were futile.

At several of the "Auctions" I attended, the operations were not quite "Cricket". All the buyers who came in were asked to sign in to a book at the entry with their name AND THEIR HIGHEST BID, and show proof of either cash, or a bank preapproval letter. This book was open to anyone who walked up, and they could see the other's high bids. Interestingly, about 80% of the "Bidder"-Buyers had only qualified for about what the low starting price was, or perhaps 5% or 10% more.

When the "Bidding" started, the auctioneer quickly asked for bids of $50,000 over the asking price. Sometimes he got them, or at least $25,000 over, then quickly on up to $100,000 over This immediately knocked out about 80% of the "Bidders" who had come to the sale expecting to get a very good bargain. From then on, they were just spectators. The result was that only a handful of bidders continued to be in the game. At least there was crackers and cheese and wine there.

What I thought was unfair, was that the auction company had other "Bidders" (were they real?) on the phone bidding against the bidders in the room. These phone bidders were being represented by the auction company, I was told. The auction company already knew from the registration book what the stated high bid would be from all the bidders who registered. Ooooh. Interestingly, these phone bidders never were the successful bidders at the auction. Were they just there to drive up the bidding price?

Now, here is another way this is not really an "Auction". You see, it was explained that the successful highest bidder had ten days to back out without any penalty. What, you say? Yes, the highest bidder could back out soon, or later. AND, it was said that if that happened, the auction company would go down the list of the next highest bidders, offering it to them at the same price. Yes, THE SAME PRICE. Again, is the highest bidder a real buyer? Was the highest bidder just there to win, then back out when the fun was over? Did the home actually sell for that price eventually?

Finally, as the auction went on, the highest bid bounced back and forth between the last two high bidders in the room with increases of as little as $500, until one gave up. The resulting price was a so-so good deal. I saw the highest bidder back out before leaving the house at least once, after thinking about the price they finally got. Other highest bidders backed out within a day or two.

So, don't believe you will be allowed to buy that home for anywhere near the original asking price. Once the "Auction" begins, that price is trounced right away, one way or another. I came to the conclusion it was all really just a marketing gimmick to get lots of attention for the home that was for sale. The "Auction" did not commit the highest bidder to actually buy the home!!! There were also lots of opportunities for the Auction Company personnel to manipulate the bidding with unfair knowledge and methods. Did they? I don't know, but it surely was possible. The resulting sale price was not even good enough to keep the highest bidders on the line in some of the cases I saw.

Oh, by the way, the auction company may get a commission of 10% or more from the seller for holding the auction. I suppose that if the house HAS to sell fast, regardless of price, because of impending foreclosure or for other reasons, it MAY be worth it. However, what if all the bidders back out unless they get a discount from the final bid price? Maybe a normal sale with a realistic low price would work just as well or better. In todays market in the San Francisco Bay area, it would work.
0 votes Thank Flag Link Thu Jun 28, 2012
Renting woes,
reasonably priced listings are up for auction,....
they are probably listed under price as they are short sales. This in no way means the property will be sold for the low amount in fact they usually are not. That which looks like a deal may not be. Short sale listing prices mean nothing. the sellers lender can deny the sale in a heartbeat and will usually wait 40 days before you get to hear that the price was too good to be true.

ahhh I just realized what you meant,...
TRULIA ACTION listings,....
these are usually not even listed. this is info showing how much they are in default usually. It is info from realty trak. it is misinformation.
If you are looking for a home look for ACTIVE in the status section.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
harold@socalhomebuying.org
http://www.socalhomebuying.org
California Department of Real Estate Broker License # 01312992
0 votes Thank Flag Link Sun Nov 6, 2011
If the more "reasonably priced listings" where well priced they'd be sold by now. Your question doesn't make much sense to me. What's the price point deemed "reasonably priced"? Because a property goes to "Auction" has nothing to do with YOU the buyer. It's all about the seller either walking away or defaulting due to hardship. We have 6.3 million folks nationwide in default on their loans. What this may mean to you, the buyer, is that more banked owned homes will be coming on the market. The bank owned or REO's (real estate owned) homes, here in Sonoma County, sell for LESS, as a class of homes, than an "equity" seller and a "Short-Sale" seller (owes MORE than the home is worth). Either way you cut it affordability, whcih hit 6% at the height of the market here in Sonoma County, has shot way back up to 60%!! Rates are at historic lows. My bigger question to you, "Renting Woes", is WHY are you NOT buying in this super marketplace?!!?
0 votes Thank Flag Link Sat Nov 5, 2011
What types of auctions do you mean? Most of the auctions happening these days are trustee sales where the property is offered for bid often at the courthouse steps. These are all cash sales you can not use a loan. They are for super pros too as you have a ton of thing to check out in advance (check title for liens, condition, there may be back taxes, tenants living in the property that have to evicted). You have to pay cash for these properties and once you own it you own it. If you find out later you bought subject to a IRS lien or the property has a cracked slab, you are out of luck.
0 votes Thank Flag Link Mon Oct 31, 2011
Hi Renting Woes,
It means that they'll be foreclosures soon. They will eventually be listed with all the other houses for sale. Wait another year to buy, prices are declining. Good Luck
0 votes Thank Flag Link Mon Oct 31, 2011
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