Home Buying in Pleasant Hill>Question Details

Ariel David, Home Buyer in Pleasant Hill, CA

i saw a property that i am interested in and it is going on a auction sale on the 8th of september . it is within the complex/community i am

Asked by Ariel David, Pleasant Hill, CA Wed Sep 2, 2009

interested buying in the future. should i bid for this property? will the selling price of this property affect the value of the condominiums on conventional sale? i have been preapproved for a loan for 500k can i use this to bid for the forclosed property?

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6
Bob Georgiou’s answer
I'm not clear if this is a courthouse auction or a company that is performing an auction to sell the property.

1) If this is a courthouse auction you will have to have a cashiers check at the time of sale. If this is an auction sale, your financing can be used to buy the home.

2) If the home sells at auction, either way, those sales become comps. The key word is sell. In recent foreclosures where the bank takes the property back as Dave describes it means the loan is higher than value. In this case the ownership transfer is not a comp since there was no sale. A leinholder made a legal claim and was not an arms length purchase.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Thu Sep 3, 2009
These are all great answers ... especially when Dave points out that the Lender who is foreclosing is essentially setting the minimum price. I am assuming that your term auction is the "foreclosure auction" ... there have been an increasing number of properties that are handled as open market auctions and in that case the Auctioneer does in fact get their fee (sometimes as high as 10%) on top of the auction price.

We have seen many instances of lenders taking the property back at that minimum price and then put it on the market with an agent at substantially less... sometimes this leads to multiple offers, sometimes not.

Virtually all the homes scheduled for "foreclosure auction on the 8th" have "estimated bids" (what the bank wants) that are substantially higher than the "estimated value" ... according to the data source we use ... talk to Dave Sutton (in my office)... he has all the data
0 votes Thank Flag Link Wed Sep 2, 2009
Johnny is right and let me add one other thing. You say you're approved for a $500,000 loan, but I'm not clear whether this is going to be your residence or a rental/investment. Non-owner occupieds will require a substantial, probably 20%, down payment in today's market. If that's your intent, be sure your financing plan includes the higher down payment. If you're going to live in it, that's not an issue.

Regardless, there is a great deal of risk in buying at auction. Unlike a normal purchase, if you find out after the auction that there's something major wrong (no furnace, serious mold, or a host of other nasty things). you can not back out of the sale (as can be done with a normal sale).

Lastly, before they let it be sold at a bargain basement price, the lender will buy it at something approaching
FMV to protect their loan, even though they are way underwater.
0 votes Thank Flag Link Wed Sep 2, 2009
At auction they take cash only. If you are talking about the auctions that are at the court house steps these are cash only. There are great opportunities but you have to have the cash to take advantage of them. I have experience working at the auctions, they are very interesting is a way to put it. I would recommend visiting the auctions before you commit to them. it is a full time job in itself doing all the research. Let me know if you have any other questions. Good Luck

ericlarsen@windermere.com
0 votes Thank Flag Link Wed Sep 2, 2009
Absolutely you should bid if you thinking of building a collection of properties for rental or quicksale down the
road when the market gets turn around. The way you pay for this prop[erty will depend on whether the seller is accepting finance deal or all cash deal.
0 votes Thank Flag Link Wed Sep 2, 2009
Read the terms of the auction sale closely. Most of them will want a 5% buyer's premium. This means they will charge that on top of the sales price. You also would most likely need to register up front and have no inspection contingencies. You also will have to close within the timeframe of the auction company, not your lender and would possibly have daily charges for anything over their time period. READ everything carefully!

The sale (if it was done) would affect the FMV of comparables in the area, especially the units within the HOA.
0 votes Thank Flag Link Wed Sep 2, 2009
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