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Published: Friday, November 27, 2009
Southern California foreclosures still account for the bulk of area homes sales and lenders are finding real estate auctions the fastest and most efficient method of clearing their books of REO properties. Buying a home at auction requires a little prep work, however and the experts at homeauctionexpo.com share their insight on how to find the best home auction properties.
According to market researcher MDA DataQuick over 40,000 new and resale homes sold last month, down slightly from the 20-year average of 44,000. Of that number, 41.9% were bank owned homes that had been foreclosed on in the last year. Again, this is slightly lower than the all time high of 58.8% last February, but still a good indication of the number of bank homes available on the market. To accommodate these high numbers of REO properties, lenders are continuing to use foreclosed home auctions as a means of selling large numbers of homes quickly, and at rock bottom prices.
“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light not our darkness that frightens us. Actually, who are you not to be? You are a child of God. Your playing small doesn’t serve the world. There’s nothing enlightened about shrinking so that other people won’t feel insecure around you. We were born to make manifest the glory of God that is within us.”
- Nelson Mandela
Be very careful not to get swept away at auctions. Most bids that are won are usually rejected and sent back to the auction block. You might think that great deals are being made, but the devil is in the details. Banks are behind this sinister way of selling properties. You see, all those properties at auctions are bank owned (REO). Banks place a minimum reserve amount on each property, usually no more than 10-15% off FMV, and that's only because it's probably in need of major repairs. When the winning bid is presented to them they can reject it without recourse because it did not meet their reserve amount. The unsuspecting bidder thinks he won and goes home with a wide smile, only to get a call the next day informing them of the rejection. The naive spectator starts to salivate at all the great deals and wants in on the action.
By the way, those who actual buy at auctions, well they pay almost what the FMV on the property is. They do not get deals. Banks say yes only to the ones that meet their reserve. No reason for banks to give away things that they will lose money on.
We always hear that banks are not in the property management business, but think about, banks are also not in the money losing business either. They employ the best and brightest MBAs to make them money, not give it away at some loud-mouth-carnaval-style auction.