REO Auctions

Yeah. Banks love these. They tend to blow out properties above what they get from realtors.

Here is my advice. Pick a handful of properties (like 3-5). Do as much due dilligence as you can. (Not so much at this late date I would guess).

But most of all, pick an absolute MAXIMUM price that you will pay. If the bidding goes above your price, WALK. Don't talk yourself into paying more. Often, people at these things do NOT get good deals. They get caught up in the bidding frenzy and over-pay.

Also, find out if it's an absolute auction ie is their a minimum bid (disclosed or hidden) below which the bank can refuse to sell the property.

Good luck and have fun.

Where's it at? Does it cost to get in? I'd like to attend, I've never been to one before either... Thanks!
Elena

Elena,
Go to www.ushomeauction.com The auction is at the Arizona Grand Resort-Oasis Pavillion at 8000 S Arizona Grand Pkwy, Phoenix 85044. Registration begins at 5:30 PM, Auction starts at 7:00. You need a cashier's check for $5000 made out to yourself. The instructions are on the web site. If you are going to go, call me, I have comped some of the props.

Al

Has anyone purchased or tried to purchase property through one of these REO auctions? If so what was your experience? I have heard both bad things and good things.

Al

I attended the REO auction last night and was very impressed. The auction was held in Phoenix and included properties all over Arizona. There was a 5% buyers premium added to the winning bid (goes to auction company) I had comped a few properties before attending. The auction list gave previous value of properties, which I confirmed from MLS records. I averaged previous values and purchase price (including buyers premium) on 11 properties. Average purchase price was 45% of previous value. I also averaged comped values and purchase price of 10 homes and found them to be 64% of comped values. I don't know what repairs were needed to homes, but it looks to me like REO auctions are worth looking into. One other note: Sales still needed to be approved by sellers.

Al

THis is a negative.

I wonder what happens if they're NOT approved by sellers? Do they tell you that? Would be interesting to find out what happens in that case.

Then you dont get to buy it. The seller retains it and can then list it, re-auction it, whatever they want.

Basically this is NOT a no-reserve auction.
And that is the problem. You could do all your due dilligence, spend a bunch of time, get a deal and then have it yanked.

Think of it as like a short sale but probably mor dangerous since I doubt you have an inspection contingency at the auction.

Do you loose your deposit if that happens?

I dont know for sure.. but I cant imagine you would. It's not YOU who is not following through.

Ok, until I heard the "seller must approve" clause I thought it sounded pretty good. That whole clause is in there just in case someone gets too good a deal, or... they have a pretty clever scheme in place.

The scheme being they just hold a auction, get all the REO property info for a bunch of them, then auction them, even though they don't have any commitment. Once they have a solid deal on paper, then they present it to the bank. If they accept the offer, it is "approved", if not, it's not. I don't know for sure that is what they are doing, but if it wasn't, a side from psychological aspects of bidding, it would make more sense to just start it at the absolute lowest floor possible.

Either way, that clause is a bummer. When I go to auctions for any type of personal property, if I win, I pay, I take it home, none of this approval stuff. How long do they have to inform if it is approved before the bid is null and void?

I intend to follow up on these sales and check tax records to see if properties were sold. I can't believe the auction company would go to the expense of promoting these sales, and paying all the people involved, if they were not getting paid for their efforts and expenses. Banks may have to pay a fee if they back out of offer. I will wait a few weeks, then check ownership.

Al

I just emailed the auction company, asking these questions. I will let you know if I get a response.

Al

That's the way auctions I've participated in worked too. You win, you pay, you take it home, or sign the title/deed.... Someone's making money off these auctions or they wouldn't be holding them! Of course if they're getting a 5% premium for each one sold, that's not a bad take home for the day, that's almost as much as a Realtor would make. Hmmmm, I wonder if they still keep that 5% if the deal doesn't get accepted? If so then it's a win/win for the auction house and a pretty good way to make money from REOs... LOL!
Keep us posted on what you find Al, I'm very interested in knowing the outcome. I believe one house was in my area, I'll keep my eye on it.

We were told at the auction, that if we did not qualify for financing or the offer was refused by the seller, we would get our money back. I may have mislead you. The auction company took a 5% premium.

Al

No no, I went to the website and read it. I thought that was the auction house's fee for holding the auction. They have to make something for these auctions!

I went to my MLS records, and checked to see how many or the homes that sold at auction were accepted by the banks. I checked about twenty of the homes in the lower priced neighborhoods of Phoenix. Only about 10% of the sales were accepted. In northern Phoenix/Glendale about 70% of the sales were accepted. I believe that these homes were selling for between 60% and 70% of comped value. These are the homes that I am the most interested in, and I will probably attend another auction and make some bids.

Al

I couldn't help but add a little something to this great discussion. I attended an auction just to see the process and how it all worked. I found out that not only are there REO's but investors will have the auction houses sell their properties, landlords, private owners, etc. What I saw was the investors, landlords, private owners, and even REO's, their properties will sometimes have a reserve and if that reserve is not met, I saw the auctioneer ask the seller if they wanted to stop the bidding because the reserve was not met or if they wanted to continue. So if a reserve is not met, a seller can stop the bidding for their property. I also learned that when an auction is an "Absolute Auction", that means that there is no reserve and the property will be sold to the highest bidder.

As for REO's, BE AWARE that they will have someone or several people there working with them to bid up the price and the reps will look like average people bidding on those properties. As someone in this discussion previously pointed out, VERY CRUCIAL AND IMPORTANT, set your bidding amount/budget before you attend the auction and don't go over that by any means, WALK away as they have suggested. REO reps work for the banks and they are banking on you getting emotionally attached and will have someone there just to bid up the price way more than its worth. I hope this is helpful.

On these properties, no one stopped the sale, but if the reserve was not met, (only the auctioneer knew what the reserve was) it was announced that the sale was contingent on seller approval. If this anouncement was not made, then the bidding exceeded the reserve. There may have been some bidders planted by the banks, but all sales that I comped were well below value.

My husband and I went to Georgia earlier this summer to look for investment properties. Our realtor had a listing going up for auction through an auction house so we decided to attend for the experience.

The house was gorgeous, very little work to be done on it. The husband and wife had split and then decided to get back together to try again. The whole time, each of them thought the other was paying the mortgage. Needless to say it was too late by the time they figured it out. So, the bank foreclosed. The house was only about 4 years old. It had 5 bed, 3 bath and was listed for 235,000. This house should have normally sold for 250 - 260K.

There were several people there at the auction, which was held at the actual house, but there were only two people bidding on it. The auctioneer was trying to get a bidding war going between the two, but they were pretty savy with the whole process. This 260K house ended up selling for 174K. There was a 5% buyers premium tacked on to bring the price to 183K. I was kicking myself in the butt for not finding out about it sooner. We stayed around to get some good ol' free education. The auctioneer was explaining that it would take 48 hours to get the offer approved through the bank. He didn't believe that the bank would reject the offer. He would be getting paid 5% of the purchase price if the deal went through. If it didn't he would still get paid from the bank for holding the auction. It was a pretty exciting deal. It would have been better if we had gotten there a day earlier so we could have participated in the auction!

The funny thing about it is that my realtor had submitted an offer to the bank just one week prior to the auction for 210K. Hmm...I wonder if the bank accepted that 182K offer or if they went back to the guy that offered 210K and begged him to come back.....

Roni

It would be interesting to see what happened to this property. If you hear anything more, let us know.

Al

Real Estate Auctions are few and far between here in NW Iowa!

I WOULD LOVE TO ATTEND AN AUCTION!

I will keep searching in our surrounding communities!

What are the best ways to LEARN about upcoming auctions?

Regards,
Rohn
DeJor Properties, LLC

I found auctions on the internet, and put myself on mailing lists and email lists.

Al

Here are 13 properties in Iowa coming up for auction with one company that I have attended. There are also online-only auctions.
http://www.williamsauction.com/Search/searchresults.aspx?status=active&s...
I don't know if any of these are near you, but they are very interesting to attend if you get the chance.

Rina

If anyone is interested, I checked the web site, www.ushomeauction.com. They are advertising auctions in Chicago area, Ohio, Northern and Southern California, Arizona, Michigan, Tennessee, Alabama, Missouri, Las Vegas area, DC area snd Florida. This is the same company that held the auction that I went to.

Al

I love auctions. When I was a kid in Michigan, I used to go to farm auctions with my dad. They were so much fun! I was amazed how much I could buy for so little money. There is going to be another REO auction in Phoenix on September 6th and 7th. Over 500 homes are on the block. I received my property list about two weeks ago. I have been coming properties almost every night for two weeks (around watching the olympics). Today was "open house day" for all the homes. Although my wife and I were watching two of our grandchildren for the weekend, we went out and toured houses (they were not enjoying it nearly as much as we were). Tomorrow, one of our older granddaughters is going to watch the young ones so we can go out again. We have found two or three properties that look very promising. The ones we are interested in, were listed (and did not sell) for 60% to 70% of comped value, and will not require much repair. I hope to find a couple more tomorrow.

Wish me luck, Al

Do they have lock boxes on them? Were they around your area? I might go check some out too. Thanks for the reminder. I almost forgot about it.

And good luck!

Rina

P.S. Did the auction company ever get back to you on results of sales at the last one?

A representitive of the Auction company emailed me. She explained how the system worked. Only the auctioneers know the reserve amount on each property. I he says that the sale needs to be approved by the seller, than the reserve has not been met. I did post the results of that auction in this thread on 7/26.

Al

Interesting the different percentages of sales accepted in the different neighborhoods. I wonder if it will repeat itself at this one. Let us know how it goes.

Rina

P.S. Enjoy your "day off" from babysitting.