auctions

have no experience, but heard today that ziprealty.com is doing the same thing. got a deal with BAC (that has all the REOs from CFC) to help them to unload some of them while providing the financing. the auctions are done online. they told a case in which the appraisal came below the winning bid, so the property couldn't be unload (the financing was not there unless the winner of the bid puts up as much cash as the difference between his bid and the appraisal on top of the downpayment).

you can tell that most are subprime properties. hold on, the nice ones (jumbo and prime) are coming along. don't use your gunpowder too soon!!!

I went to one held few month ago by REDC for about 20 minutes - was just there to see how it works. If you are interested in those locations, prior to the auction look through the list, go and see the properties in open housese, and get a sense of how much you'll be willing to pay for a property and when to stop. Because beware there are planted bidders in there who are there just to push up the bids, and surprisingly it is not illegal to do so. Also even if you get to win a property at a steal as the highest bidder, I've heard they get rejected by the banks afterwards if it doesn't meet their threshold. So evenif you see few people winning at super discount, chances are they probably wont get the property. Good luck though. could be a good chance to get a place for a nice discount if you do your homework right.

I have attended many of this type of auction. There were a bunch in the early to mid 90's. I agree with much of what jjun4733 wrote, except I'm not so sure it's not illegal (depending on the state, I'm sure) to shill bid. Make sure to read VERY CAREFULLY the terms of the sale before you go, because depending on the sale all of the items jj listed, such as "Subject to seller approval", have to be fully spelled out in those terms. Also, you should get a copy of the contract you are going to have to sign right there on the spot and have your attorney look at it: it's no different than if you bough from a sponsor or other seller: you sign a contract, you should have an attorney look at it first. If the Auctioneer is not willing to let you have a contract before the sale, I would be VERY wary.

Remember, most of these properties were on the market as REO and couldn't sell (well, that's the way it always used to be) so almost all of them have SOME kind of serious defect (like a Coop with very high maintenance), so make sure you do your due diligence before the sale. Also remember if you buy a Coop at this type of auction, many Coop boards will reject the sale because the price is "too low".

Also, set your top number before you go, the room will be full of guys from the Auction house who are there to get you pumped up to bid more and will stand next to bidders egging them on, trying to get them to bid more. DO NOT LET THEM SEE ANYTHING YOU HAVE WRITTEN DOWN. Aside from whether it's legal or not, if one of these guys sees you have a number written down he will find a way to signal others to bid you up to that number.

MAKE SURE YOU CAN CLOSE. Don't assume you will get a loan on any of these units - I'm not saying you won't, but if you don't and can't close, they will keep your deposit. Also, DON'T LET THEM SEE THE CHECKS YOU HAVE BROUGHT WITH YOU (until you have to hand them over, and then go to the restroom or wherever and only pull out just enough to cover the deposit on the one you just won. If they see you have a certain amount of certified funds, the will extrapolate to what they assume your high bid will be, and again bid you up to that number. Also, put down the absolute minimum required under the terms of sale: sometimes they will tell you some BS asking you to put more down (like 10%) when the Terms of Sale say differently: don't let them bully you into anything which is not required IN WRITING AND GIVEN TO YOU PRIOR TO BIDDING (assuming you've paid for whatever their pre-sale packet is).

AFTER THE SALE remember that these were properties the banks couldn't get rid of, so if you need extra time to get your financing or whatever, have your attorney be VERY aggressive because the last thing the bank wants is to lose these sales.

Lastly, it IS possible to pick up bargains at these sales, but you have to be flexible. You aren't going to find your dream home here. But as one example, I picked up a 1 BR unit in Pomander Walk (although it was one of the one's with a West 95th St address, so it wasn't the better "inside the walk" location) for like $24,000. I forget what I flipped it for, but I never closed on it even though it was supposed to be a 30 day closing.

big 3 0 with another great post--thanks

pasted this into my drive for future ref--a first

kudos

Wow, thank you so much 30 Years.

{Manhattan real estate agent.}

"I am planning to attend an auction of foreclosed properties operated by REDC. It's at a ballroom early on a sunday. Anybody experienced this type of thing...smells fishy."

If your lookig for a crack house in Newark or Brooklyn,then the auction is a great place to go. If your looking for an apt. in prime Manhattan, FORGET IT. There is no way your going to get it.

another rational, supportive, informed post by Alpie. complete with capital letters, in case you are TOO SLOW to follow his rapier wit and logic.

"Remember, most of these properties were on the market as REO and couldn't sell (well, that's the way it always used to be) so almost all of them have SOME kind of serious defect "

about 20% of those properties in the brochure have to be cash purchases, don't allow financing. is this cause they are in very bad shape (ie, one should totally disregard them given asymmetric info)? or the cash requirement is there for other reasons?

Thanks very much for the input. I'll let you guys know how it went.

Admin - yes, the cash requirment is there because the property is not "financable"....normally fire damage, structural damamge etc.

"about 20% of those properties in the brochure have to be cash purchases, don't allow financing. is this cause they are in very bad shape (ie, one should totally disregard them given asymmetric info)? or the cash requirement is there for other reasons?"

I'm not sure I'm going to be able to explain this in an understandable way, but I'll try: while I don't know the terms of the specific auction you are going to, in A LOT of the sales, the Seller 9who is usually a foreclosing bank) offers financing on the Auction Purchases. Sometimes it's even "push financing" meaning that if you can't get financing elsewhere, you are required to take their financing on their terms. IN THOSE CASES, what the "have to be cash purchases" means is that the financing deal offered "in general" for the rest of the auction DOES NOT APPLY to these units. In other cases, it means that the Seller for some reason knows that the property is not financable (sp?) so they are merely "warning" buyers "don't big on this if you think you are going to get a loan. As you said, one reason could be the property is in bad enough shape that no one will lend on it. But be careful: these properties are always sold "as is" and although it is quite odd, I have seen instances where banks had REO they couldn't offload because of title issues, easements, etc. which would make them unable to obtain financing. MAKE SURE YOU DO YOU DUE DILIGENCE. One clause to watch out for, which is in just about every "normal" sales contract is "good an insurable title". If they are not guaranteeing you that you can get title insurance on the property, that in and of itself could be reason for it not being able to be financed, but also could be a reason you wouldn't be able to re-sell it.

I'm sure this is more appropriate for another thread, but I see the one Manhattan condo in the sale got 100% financing from Wells Fargo in July of 2006 and by April of 2007 had stopped paying their common charges (which means it's probably also when they stopped paying their mortgage). I remember looking at this piece when it came up for auction ?Spring 2008? and thinking "yeah, there's not gonna be any problems in Manhattan because there are no sub-prime loans here.... RIGHT".