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Real Estate I went to Sheriff's auction yesterday

Discussion in 'Real Estate Investing' started by tbsells, Sep 15, 2007.

  1. tbsells
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    tbsells Contributor

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    There were 24 properties scheduled to sell. Six were cancelled. Of the remaining 18 about 13 sold to the plaintiff. Many of these were bid up well over the appraised value. I bid on three. I bought none. They sold for $22,000, $15,000, and $5,000 over my highest bid. These were not great properties but most had multiple bidders. I use a simple formula to determine my maximum price: 70% of ARV - repairs. I was suprised at the number of people in attendance. My county conducts these sales monthly. I had not been in 3 or 4 months. I expected alot less people and bidders than before. That was not the case. I actually think there was more people and there was certainly more bid action. I thought all the "sky is falling" press and the actual slowdown in the market would have scared some people off. Wrong! I think its coming but the time for great buys is not here yet. At least not yesterday. Anyone else care to share some recent experiences?
     
  2. Diane Kennedy
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    Diane Kennedy Bronze Contributor

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    Anybody on the forum from Las Vegas? I heard that 1 in 5 properties in Vegas is in arrears. There's got to be some action going on there.

    In certain areas of Phoenix, there are some short sales happening - I've heard of mortgage companies offering 80% off of the loan amount. But, there are a lot of 125% financed houses, so 80% off of that is no deal.

    In other areas of Phoenix, such as Paradise Valley ($1.5 mill + homes), the market never dropped, just sales times lengthened. Stats show that homes are selling again.
     
  3. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    I thought about making a new thread, but I think this one fits better. On Tuesday I plan on attending the foreclosure auctions in my county. I will be a fly on the wall. A fly on the wall with notepad and pencil :smx9:. So a semi-quick question;


    If you were to observe a foreclosure auction with no interest in buying (yet), what are some things you would take note of?
     
  4. tbsells
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    tbsells Contributor

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    I would make note of who is buying. Is it a "real buyer" or an attorney representing the plaintiff? The plaintiff is the lender who sued the owner for foreclosure. Many people don't realize it, but the sheriff sale is the end result of a lawsuit. In my recent experience the plaintiff bought most of them. You can tell because there last bid will be something like $122,366. Nobody else bids like that. All the other bids will be in normal increments of $500 or $1000. When the plaintiff buys it, it will come back on the market for sale in a couple months.

    If a "real buyer" buys it, he is probably an investor who thinks he got a deal. Its unusual to see someone buying a house to live in at these things. Usually you are buying without seeing the inside of the house, so its too risky and not appealing for most people looking for a home. You might make note of what other investors paid for houses in your area.

    I would also note the price paid vs. the appraisal. The appraisal in Ohio is important. The property cannot sell for less than 2/3 of appraised value by law. The suprising thing is how much variation there is in the appraisals. Some months they are pretty accurate, other months they are way off. I guess it depends who does them. You need to have your own knowlegde of what the property is worth because you can't trust the sheriff's appraisal. Its only useful in determining what the opening bid will be.

    Auctions are fun. You will probably see a diverse an interesting group of people. I would have my eyes and ears wide open to learn all you can and get familiar with the process. Lots of money can be made at these things. After you go a few times you will start to notice trends such as what lenders tend to let theirs go a little cheaper, who the fools are, etc. I would observe behavior closely instead of focusing on taking notes.
     
  5. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    I suggest you get the list of properties that will be auctioned off and do a quick check on the web for estimates (use the county's assessor office or tax records, usually online in most counties) and another free online toll like zillow.com. Use these estimates to get an idea of what the properties supposedly are worth and then compare to see how much the winner pays for it. Once all is said and done you will be able to compare numbers between your estimates and real sale values.

    Also, once it's over, try to talk to at least one of the investors, to see what they can tell you about the current market conditions.
     
  6. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Very good advice, thank you. I have generated a list of 100 homes within my range, 19 of which are promising. I have to double check some dates, since all of them won't be sold Tuesday. My county trustee's office said about 15 properties get auctioned on Tuesdays while the rest get a continuance or stay. Observing is exactly what I want to do. I am severally weeks from actually buying. I thought I would get a feel for everything. The notes are more for me to look back at, memory jogger.

    Talking to some investors there is also a great idea. I look forward to this. I hope to learn a lot attending these auctions.
     
  7. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    I went to the Trustee Auction today (glad I rechecked the date). What I found was much different then I expected. Of the 100 properties in the county on the chopping block, 30 went to auction today. Running the show was the County Trustee her secretary, and in attendance, 5 other joe's like me that were there to learn the process. There appeared to be 1 investor there. Unfortunately I didn't get to him before he left.

    Some interesting notes. All 30 properties were sold back to the lenders. No one made any bids. I checked my sheet when I got home. Several properties foreclosure's minimum bid price was actually higher then the value of the property. However, there were 5 properties that were 70% of actual value(one as low as 55%). I am still investigating any other primary liens that were on these properties (ie liens not removed via foreclosure).

    Several properties had deficient amounts on them as well as the minimum bid. Am I to assume these have to be paid off as well as the bid amount? I kicked myself for not talking to the trustee when I had the chance or that one investor. Next week. :smx9:

    Very interesting, many questions were answered, many new ones were formed. Gotta love that :) . I did meet a few folks that were added to my address book for future reference. One guy was there merely for curiosity, his ultimate interest was tax liens (something I want to read a bit more on for understanding). I fully intend on visiting again next week. I want to see any trends or determine of today was a fluke. Thanks for all the advice everyone.
     
  8. tbsells
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    tbsells Contributor

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    I told you it would be interesting. I'm glad you went. Keep it up and you will learn how it works quickly. I can't believe there were no bids. The one I went to last week had multiple bidders on many of the properties. The one investor must have thought that all the propereties were to high at their opening bid.
     
  9. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Here most (if not all) of the properties advertise the opening bid in their legal announcement in the newspaper. What I don't know is how to find out if the opening bid changes before the auction starts. I've heard of people buying way lower than what was supposed to be the opening bid, I just don't know how they advertise/publish it, if at all.
     
  10. Jason_MI
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    In my state, the lenders ALWAYS have a check there for what they are owed; that's the opening bid. Knowing that, I can look at the legal notices in the paper and seperate the gems from the majority of dogs. A house worth 200K (maybe) going for anything over 150 is not even worth a look.

    The second thing I ALWAYS figure out is what position the foreclosure is on. In this day and age, many, many people have multiple loans against their homes. A 200K value home going to foreclosure for 60K? That squeals "HOME EQUITY" loan louder than a pig on barbeque day, which means it's almost always a 2nd position, which means that even if you get it (60K), you don't and won't own the home. A better idea might be to find out where those people are in terms of the first (is it in arrears), short sale and control the 2nd, then pay full price on the first. So....if you could short the 2nd at .05 on the dollar (since the bank is going to lose it), that'd be 3K to help control the house. Even if the first goes for 140 or 150, if you buy it at auction, that's 153K into a 200K house. Now there's an idea.....
     
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  11. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    I guess I'm confused. I thought all junior liens on the property were wiped out at the foreclosure sale, unless the homeowner redeems the property. I will have to get clarification on this. I plan on scheduling a talk with an attorney next week. This will go on my list of questions to ask.
     
  12. bflbob
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    bflbob Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    I went and looked at a couple places there with Kenric and some others at last year's gathering.

    Pretty impressive little area!
     
  13. bflbob
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    bflbob Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    All junior liens ARE wiped out at foreclosure (unless the bid is high enough to pay some).

    What I think they are talking about is a 2nd bringing about the foreclosure action.

    Say a place is worth $200k, and has a 1st of $150k and a 2nd of $10k on it.
    If the 1st forecloses, they'll bid $150k. If no one outbids them, the 2nd gets wiped out.
    But if the 2nd forecloses, they might bid $160k knowing they have to pay $150k to the 1st.

    Or, they might bid $10k, knowing they'll need to catch up the 1st or pay it off.:coolgleamA:
    In this case, a newbie might outbid them at $11k and think they got away with a bargain.:smxG:
    Until, that is, the 1st comes a calling.:bgh:
     
  14. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Bob, have you bought properties at sheriff's auctions? Just curious about your experience here given that you have done so many transactions.
     
  15. Jason_MI
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    Jason_MI New Contributor

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    Bob's right; my experience has been that the 2nd tries to foreclose first when they know about it, so they get the Sheriff's Deed. And they know about it, because people often don't pay other bills before the mortgage....so as they have troubles, they don't pay the HELOC, and it tries to foreclose.
     
  16. camski
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    In Indiana the attorney doesnt even attend the auction. The opening bid is the attorney's offer. If someone bids over that then bank has what they were asking out of it. Some sheriffs department will allow you to call and get the opening bid ahead of time and some wont.
     
  17. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    I attended another trustee auction today. 13 people in attendance. 1 bidder, 23 properties that went to foreclosure. Today was a good day, the investor I missed last time, I was able to catch up with this time. He is willing to sit down and talk with my partner and I. I purposely went to the auction to network. I think its worked. Very exciting indeed.
     
  18. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Did that investor buy anything today? Did you see anything that looked like a deal for you?
     
  19. nomadjanet
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    There was an auction in our county Tuesday. I have not been in awhile but when I have been before there were about 50 people. Tuesday there were more than 300 people. It made the front page of the newspaper & the 5 o'clock news. People know that repo's are going up and they are lining up to buy.
    Janet
     
  20. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    No, the investor didn't buy anything today. He buys out junior liens on properties and waits for the 75 day redemption period. As a junior lien holder, he can then go after the home. He attends the auctions to see which properties have been foreclosed on. I am not entirely certain how it works, but he said he would be willing to sit down with me and explain the process. I think he also attends these auctions as a way to network. He mentioned that he has partnered with several people he has met at the trustee auctions.

    As far as our county goes, there are about 400,000 people and at the latest auction there appeared to be 3 investors and 10 newbies. There were 2 properties that were possible deals as they foreclosed at less then 70% value. The one property bid on was purchased for 74% value. There was also a property whose bid amount was 15% market value. I checked and it was a 2nd mortgage that was defaulted on.

    I am rather excited to be able to talk to this investor. He seemed very willing and somewhat interested in chatting with my partner and me. Are there any cautions I should be looking out for? This just seems to be a great way to get my foot in the door, but I feel like a kid in a candy store and I don't want to have clouded judgment.
     
    Last edited: Oct 3, 2007
  21. terrancefoster
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    Hi Tbsell what part of Ohio are you in
     

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