Even a reserve price auction would be understandable if buyers were made aware before hand that there is a reserve price and if the highest bid does not reach this reserve price than the property would not be sold. One of my buyer's agents had a client that insisted upon attending one of these auctions, nothing was ever explained to the buyer, or the buyers agent ,of a "reserve price" or that the highest bidder may still not get the property UNTIL her buyer had won the bid and the auction was over. The agent conducting the auction (who was a Realtor) told her that her highest bid would be presented to the bank as an offer. The buyer immediately told the Realtor 'this is a crock of &%$* and forget to it.
I have been conducting Short Sales for years, and as you stated most of them go back to the bank. There is a two fold reason for this #1 banks are often times uncooperative and #2 many agents who do not know how to handle these types of transaction are "attempting" to do so with little or no training in these types of sales. When conducting Short Sales the agent must be on top of the bank on almost a daily basis. If the agent simply sends the offers off to the bank and waits for a response, they could be waiting until (pardon the expresion) the second coming of Christ. Banks are notorious for loosing short sale offers, claiming they never got them, and when they do respond many times they are looking to get full market value. An agent who is experienced in short sales knows they need to explain to the buyers agents that persented the offer (or offers) that the bank is trying to recoup as much of their losses as possible and that the buyers agent can still come back with a Counter Offer. My advice to agents that are 'trying their hand at short sales" is not to do it unless you have a very experienced mentor or fellow agent that his helping you through our first 4-5 short sales. Rembember that your seller is counting on you to help save them from foreclosure, and if you don't know what you are doing, you could be doing your seller a great injustice.
As far as Trustee Auctions, it sounds like Phoenix is very similar to Vegas. I have only been to a couple Trustee Auctins and 95% of the time each house never receives a single bid, and just as you stated most of the homes are going back to the bank.
Thanks Michael and Patrick for your posts.
John Goad, Jr. of The Goad Team
Century 21 Infinity
And that poor young couple can stay in there apartment until they learn to spend big.
Its all more of the same over hypeing the home values we saw before and failure in the making.
Be careful about the realty scam because real estate has only begun to correct as there are no longer enuff suckers to keep prices from collapsing.
As I post this reply another real estate "auction" is coming to Southern California and the advertisements, (costing tens of thousands of dollars) abound on TV and in the Newspapers. Many of these homes are the loser properties, the ones they could not sell to folks for a multitude of reasons, many of them hidden reasons that you, the Buyer, will not find out about until after you have given the Auction house your nonrefundable earnest money! Many of them are even "Teardowns" (structures so messed up it is cheaper to tear them down than to try to repair all their defects), and many others have been "red-tagged" (illegal to inhabit) by the local Building Departments.
You cannot win, so do not even bother to play. Ignore their hype and read the "Terms and Conditions".
In the interest of public education here are a few facts:
All Properties have a Reserve Price, meaning the Seller of each Property has established an unpublished, minimum selling price. The starting bid is not the Reserve Price.
My comment: Why attend an auction where you don't know the minimum price? Reserve auctions are OK, assuming the reserve is disclosed. Absolute (i.e. no reserve) auctions are best. With an unpublished reserve, you are shooting in the dark.
the Auctioneer may open bidding on any Property by placing a bid on behalf of the Seller and may further bid on behalf of the Seller, up to the amount of the Reserve Price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders. Yes, you may think you are bidding against other legitimate buyers when in fact, some, or even all, of the other bidders in the audience are actually SHILLS! Yes! They are employees of the Auction House who are pretending to be Buyers so as generate excitement and to run up the price of the property to regular, and often even above, Market Value.
My comment: The auction house bids against you? So not only are you up against other bidders, but you are bidding against an auction house, up to a price you don't know.
"Winning Bidderâ€™s purchase is subject to, and contingent upon, the REO management of Seller approving the purchase, which shall be given or denied at their sole and absolute discretion within fifteen (15) business days"
So even if you manage to outbid everyone else, and the auction house, the bank has 2 weeks to reject your offer.
At some of these phony auctions you even have to pay the commission, rather than the seller paying it, up to 5%.
Remember: The Auctioneer is not acting as an agent for any Bidder in any capacity, and is acting exclusively as the Sellerâ€™s agent.
At US Home Auctions they state that "The total purchase price will include a buyerâ€™s premium equal to five percent (5%) of the winning bid amount"
"The buyer's premium is the fee the Auctioneer charges the bidders to bring the Property"
5% is a steep fee to pay as a buyer. Normally a the seller takes the hit for the 6% agent commission.
Folks, there is no way you'll get a bargain here. Hold out for absolute auctions. There is a tidal wave of foreclosures about to hit the market, and you'll get a much better deal.
In case you still have no common sense and still plan to attend an "Auction" --Ok.. so you found a property you want to bid on, you did your home inspection, well scratch that, you went and take a look at the property, Itâ€™s not going to be anything close to a home inspection, none the less you like the property, you did all the pre-auction prep work etc. and came up with a max price and want to take a shot at bidding on it. Now what, well.. make sure your prep work included READING the CONTRACT carefully and understand that itâ€™s 100% ONE SIDED in favor of the seller. In the event youâ€™re the unlucky one to win the bid, yes thatâ€™s right, I did say UNLUCKY, because the nightmare may just be starting. â€¦.READ THE CONTRACT..READ THE CONTRACTâ€¦.and other docs youâ€™ll have to sign..all of the over 100+ pages.
I am a licensed Realtor in Scottsdale, AZ (14 years experience) and while this exact type of thing is not common, what I do find is that these huge public auctions ( US Home Auctions) are also a scam. A client of mine let me in on some auction secrets. First off, the banks plant "shields" in the audience to jack up the price of the home, and they all have "secret reserve prices". These prices are the prices the banks need to clear on the home, to sell it. The shields bid up the price to at least the "secret reserve price" and then the buyer ends up paying an inflated price anyway. There is no difference between making an offer the "old fashioned way", through a Realtor on a bank owned property or going to an auction. The bank simply will not sell below a certain price. At the auction, the buyers usually end up paying much more than what they would have paid on a standard offer. Talk about a scam!!!!
What the questioner is asking about is something entirely different. The auction is conducted. A number is arrived at. At that point, the number is presented to the seller, who decides whether to accept or reject it.
I'm not sure I'd call it a scam. But I do think it's dishonest and deceptive unless those rules are clearly presented to the bidders prior to bidding. (And really prior to the bidders taking the time to go to the auction to bid.)