The ads read “Lender Foreclosure Home Auction 1000+ homes must be sold!”. The hype is extensive, the publicity broad. The auctioneer company, headquartered in Irvine, California will hold auctions throughout California in the next 3 weeks. It also holds auctions in other states.
I am registered as the broker to attend the April 6th auction with a buyer. This will be my very first real estate auction. I am an expert in properties, my client is an experienced purchaser at auctions. We both approach the event from different positions. He hopes to buy several properties at a very good price and value. I expect to help with the real estate side, while learning about the auction process.
This week we toured the properties that he might bid on. I looked for potential problems with the properties, reviewed expected rents, reviewed history of the property values, delineated expenses (Mellos Roos taxes, bonds, assessments, association dues, extra maintenance). He calculated the maximum he would be willing to pay at the auction, taking into consideration potential income, the loans and closing costs needed, plus the extra 5% buyer’s premium that will be added to the purchase price.
Besides the website there is a 1/2 inch thick booklet describing the properties and auction procedure. The starting bid is often described as 1/3 the previous value. It is much lower than the price the property was previously offered at through the multiple listing service.
Will the bidders be able to obtain a bargain? Or, will the sellers benefit from the hype and sell the properties for a higher price? I am anxious to find out. As I read the fine print of the auction rules, I discovered that the sellers all have an “undisclosed reserve”, and that they can bid against buyers up to that amount. (Does that mean that the lenders will bid against the potential buyers until they reach the price they want?) Again, I am anxious to find out.
The auction should be exciting and interesting. I envision hundreds (thousands?) of people, each with the required cashier’s checks and lender approval letters in hand fighting to buy the 460+ properties to be sold that Sunday. If the properties all sell, with the 30 day mandatory maximum escrow period, our statistics on closed sales should be very favorable by mid May. Then we will be able to see whether the benefits were better for buyer, or seller, or maybe for all of us since there will be 460 less homes for sale.
