Are there any bargains to be had purchasing forclosed houses at a RELO auction?

Asked by Labuyer, Mendocino, CA Mon Sep 17, 2007

In this case the bank has several exactly similiar properties listed at the condo complex I am looking at . However out of these they chose to list one property at around 45% lower than the current listed prices in an forthcoming auction - kind of like testing the waters for them I guess. These condos have been repossed by the bank and refinshed to pretty good condition with new floors appliances and new cabinets.So my question is what will be the elasticity in the floor price the lender is willing to settle the condo at and if they dont get the floor price can they refuse the lowest bid price? Becuse it seems to me they would not want to sell at the entry level price (45 % lower) mentioned earlier since they do have these other listinging in the complex they would like to sell at some point int he future?I do own my home but this would be a first time auction purchase for me (Condo for Parents) Any advice greatfully accepted.

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Jim Walker, Agent, Carmichael, CA
Mon Sep 17, 2007
These post foreclosure auctions are usually heavily advertised and well attended. They are designed to get a good price for the seller. The opening bid is just to get the ball rolling. These properties almost have a "reserve" price that is much closer to market value. Reserve means they reserve the right to not sell to a winning bidder at a price below what they really have set as their minimum.

It could still be worthwhile if you are able to buy it for 90 to 95% of value.

Ute is thinking of pre-foreclosure auctions when she says inspections are not usually available before the bidding. The post-foreclosure auctions usually have two weekends of open houses before the auction date to allow "viewings" and they will also usually allow inspection and financing contingencies. READ your contract and the auction company brochure thouroughly. = Also you can be represented by an agent at one of these auctions. Contact an agent you trust to attend with you. - They will be paid a tiny commission by the auction house, but it does pay for their gas and their lunch.
2 votes
Pam Winterba…, Agent, Danville, VA
Mon Sep 17, 2007
My take on this is the bank has priced this property as an opening bid at the auction. It is much lower to attract interest. More parties bidding on it at the auction will probably drive the price up to market value or sometime higher.

As Ute said be careful when bidding at a property sold at auction. Usually they are an "as is" sale and may times there are no inspections or you may not have the opportunity to have them. Good luck.
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Ute Ferdig, Agent, Newcastle, CA
Mon Sep 17, 2007
Hello Labuyer. Thanks for the clarification. Now I understand better and it makes more sense. I am wondering if the condo that they picked for auction might be the least desirable. Anyway, as I said in my earlier post, trying to figure out what the bank might be willing to accept is difficult. I can tell you that you don't even have to bother and try to contact the bank directly. Banks do not deal with the buyers or the public directly. They have their asset managers do that and the one condo that is going to auction is probably already under contract with the auctioneer and they can't give you any answers to your questions either. Just one note of caution. When you purchase through an auction, you most likely will not be able to inspect the property before the auction and some people can get carried away in the bidding process. You really need a solid understanding of what the value of the condo is and stop when the bidding gets above what you are willing to spend no matter what others around you might do. Don't get caught up in the bidding frenzy. I know you said that the condos have been rehabed, but how do you know that the asking price of the condos that are currently listed is not too high? You know what the starting bid is and how much below the listing price it is, but you don't know how much a reasonable price is. How will you know if you get a bargain if you don't have a good idea of the fair market value? I should not assume that you don't know, but since you did not mention it, I am bringing it up. I would highly recommend that you seek out the advice of an experienced agent. I have nothing to gain from my recommendation. Just looking out for your best interest.
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Labuyer, Home Buyer, Mendocino, CA
Mon Sep 17, 2007
Thank you UTE. Perhaps I should be clearer. The bank has listed several properties listed for Sale in this Condo complex - most if not all redone and redecorated. And as far as I can tell only this one is being disposed off via the auction route. Thanks for the comments on contacting the bank thru an agent. I might go that route in future but have not decided yet.
1 vote
Ute Ferdig, Agent, Newcastle, CA
Mon Sep 17, 2007
I am not sure why the bank would put only one property in the MLS and auction off the others. How do you know that they will do that? Usually banks don't send REOs to auction until after they were not able to sell them through the MLS. I think you are right as far as the first condo being on the market as a test. What a bank will be willing to accept is almost impossible to predict. I think it will depend on how long this first condo will be on the market and also what the comparable sales are in the neighborhood. Are these condos desirable or is there an oversupply of similar condos? My recommendation would be to contact a local agent to find out what the fair market value is for the condo and then make an offer based on that. Don't be afraid to make a low ball offer. That's the only way to find out what the bank is willing to do. You can also expect that the bank will counter close to asking price. With banks, you usually go back and forth quite a bit and a lot of the negotiations are done verbally through the agents. Once a verbal agreement is reached, the bank's agent puts the counter-offer in writing and submits it to the buyer. This is more time efficient than doing things in writing. Good luck with this experience and make sure you hire an agent who is knowledge in dealing with bank foreclosed properties.
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Carrie, Both Buyer And Seller, Say Cheese!
Tue Sep 18, 2007
My experience at watching auctions--I call it Auction 101--is that the amount the property is sold at is usually half the difference between the opening bid and the "market value."

Maybe the bank is trying to see how the Auction does for them.

Some auctions are rerun, because the winner didn't really qualify for the property. Some continue after the ending time, because the reserve wasn't met. These kinds of properties have an after auction, and often here's where you get the best deal, because the bank really wants to sell.

The best deals are preforclore properties, where you deal with the owner who wants to avoid foreclosure. This is not for beginners.
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