Belt Auction

Buying a foreclosed home at auction In Northern California - advice please?

My husband and I have been following a house that has just had its auction date listed for later this month. It was originally on the market for $479,000.00. We went to look for a laugh and it was WAY over priced. This was later reduced to $419,000 which we discovered was the amount owing. We started working on the owners and the bank with a short sale - the bank valuation came back at $319,000. We offered $300,000 and it was accepted. During this time we had a full inspection done as our families are builders and contractors and realized that the house was a tear-down essentially as it needed new ceilings, roof, foundations, flooring and had wood rot and mould. We retracted our offer and the property moved into foreclosure. I still love the land it is on, and so if we can get for a good price we would like to tear down the house and rebuild. Our family is helping us as this is our first house and we have a line of credit available. 1) Do banks set a minimum bid or does the lowest bid get it. They have not posted an opening bid yet. (we have a figure in mind that is market value for a comparable piece of unimproved land) 2) Can you speak to them beforehand and make an offer so to avoid the auction day? (this is not a property that is likely to have more than one bidder) 3) We have been told we need to pay cash, but when? If it is on the day then how do we know how much to get a check for? Can we put down a deposit on the day and then pay the balance? 4) Does an auctioned house come with free title? That was one thing we couldn't make sure of before bidding. 5) Someone told me that the owners have a certain amount of time after the auction to pay up and get the house back - is this right or is the house mine from the time the money changes hands? Thank you very much for any help you can give us! Mike - In the case where a house is 'upside down' do the banks still do the same thing?

Public Comments

1. With respect to the auction at a Trustee's sale, the bank generally puts in a bid for the amount of money that is owed on the loan. 1. If there are no bids higher than the amount of money owed on the loan the bank essentially becomes the purchaser of the property at the Trustee's Sale. 2. Prior to the Trustee's sale you can offer to purchase the property from the present owners, however it sounds like you already made an offer and withdrew your offer. It also sounds like the present owners owe more than the amount of the Fair Market Value of the property. The lender would have to agree to a short sale. 3. At a Trustee's sale you must pay all cash in the form of Cashier's Checks. The Trustee who is conducting the auction will ask to inspect your Cashier's Checks before he will allow you to bid on the property. The Trustee will not accept a bid from you that is higher than the amount of the Cashier;s Checks that you have showed him. If your bid is accepted then you have to give your Cashier's Checks for the amount of your bid to the Trustee who is conducting the sale on the spot. Normally bidders at Trustee's sales will have a number of Cashiers Checks in amounts of $100,000, $50,000 and $10,000. If you do not have the exact amount, you will pay enough to cover the bid plus some. The Trustee will then issue a check to you for the difference. For example if your bid is accepted and it is $275,000 and you give the Trustee $280,000, the Trustee will later issue a check to you for the $5,000 difference. 4 The auctioned home does not come with any guarantee of tiele and there is not Title Insurance Coverage. There may be other Tax Liens, Mechanics Liens and the like that are not removed by the Trustee's Sale. Also you get no guarantee of posession. Generally the origianl owners still live there and will now have to be persuaded to leave or be evicted. 5. With respect to redemption rights, that varies from State to State. You need to contact an attorney who specializes in Real Estate Law, because that is a legal question. (Edit) Thank you for the additional request. Where the property is "upside down" that is the borrower owes more than the fair market value, what the lender does, varies with the lender. In the past the lender always submitted a bid equal to the amount that was owed on the property. The result was that the lenders always got those properties back if the amount owed was greater than the Fair Market Value of the property. In today's market more and more lenders are determining what current Fair Market Value of the Property is and are submitting that as the minimum acceptable bid, in the hopes that someone will bid higher at the Trustee's Sale. This way if someone bids more than the minimum bid, the lender gets the cash immediately. The lender does not have to take the property back, evict the current occupants, list the property for sale wait a month or two for the property to sell. Still from what I have seen is that in most of those cases the bank still gets the property back because they set the minimum bid too high. If the minimum bid is fair market value then it makes more sense for a bidder to instead buy a house that is listed for sale because under those circumstances the purchaser can get financing, can inspect the house, gets guarantee of good title free of liens and gets title insurance and is also guaranteed posession, (You do not have to evict the previous owners) I would only purchase a property at a Trustee's sale if I could get it for a discount of at least 30% below fair market value. Also I never pay more than land value if I purchase a property at a Trustee's sale. I assume that the structure will be so badly damaged by the time that I get posession that the structure will have no value. That sounds like that is the case with this house. It has no value. You do not want to pay more than land value. I recommend that you contact a Real Estae Appraiser who is a Member of The Appraisal Institute and ask him if he will agree to estimate the value of the land for a fee. Since the house is going into foreclosure the current owners may not permit him to inspect the house. If for example, the Appraiser were to estimate the land value to be $200,000 the maximum that I would pay at a Trustee's Sale is 70% of that or$140,000. The lender however probably will not accept a bid that low. the lender will probably submit the amount of their loan as a bid and then list the property as an REO (Real Estate Owned) Property. I would attend the Trustee's sale. If you can get the property for 70% of land value, I wuold say go for it. If you do not get the property and the lender gets the property back, I would immediately contact the lender and offer the lender an amount of money that is equal to land value for the property. As part of the package to the lender, include your Appraisal from the Real Estate Appraiser that you hired. Include your explanation why the structure has no value. You might ask a General Contractor that you know to take a look at the property and write a short paper describing the problems with the structure and why the structure has no value.
2. Mike's 100% correct. I would just add that if you are the successful bidder, you will not get a deed to the property. Since it's not an REO, the bank isn't in title and can't convey title. You will get a certificate of title or similar named document. You will then have to retain an attorney to file a court action called quiet title. That usually takes about 90 days. realtor.sailor