It’s an ongoing joke between Jim and I, “Did you see the paper?” he’ll ask, knowing quite well I’m not a newspaper kind of guy. I’m an internet reader - that has recently added watching the morning news to my routine. So I usually respond with something like, “I’m not old enough to read the paper” or “not lately”. Then he continues with extremely important news that I probably should have read about, but that’s what I rely on him for, like he relies on me to bring him technology news.
However, this weekend I was looking for the paper, because the Arizona Republic regularly gives Jim the opportunity to write an article for their Broker’s Corner spot of the real estate section. Sure enough, in Saturdays’ northeast valley run there was Jim’s smiling picture (no it wasn’t his high school photo!) next to the informational article on auctions here in Phoenix.
The Republic doesn’t publish the Broker’s Corner article on the internet, so for all you out there that missed it, or aren’t newspaper kind of people either, here you go.
Real Estate Auctions by Jim Sexton
You have seen all the hype on television and heard all the news on a declining market, so you have decided to do banks a favor and take some of that real estate off their hands. You might also “make a killing” in the process. It could happen for a savvy investor or prospective homeowner. But first you need to get the facts and go prepared.
Trustee Sale Auctions: These are auctions held by the Trustee under a Deed of Trust; the minimum bid is usually the amount owed the lender plus any costs they have incurred. The winning bidder must have a $10,000 non-refundable deposit and the balance of their funds in cash by 5PM on the next business day (see Arizona Revised Statutes 33-810 for full details). Although it is possible to pick up some bargains, if the owner had sufficient equity he would probably have sold the property rather than let it go into foreclosure. These properties are generally sold “as is” in whatever condition they may be. Some properties have multiple liens so be sure you know which lien is being foreclosed.
REO Properties/Lender Auctions: An REO (real estate owned) is property that the lender took back at a trustee sale. The lender now owns the property and will usually evict any occupant and may do some repairs. The lender/owner may list the property for sale with a real estate broker or turn the property over to the auction house. Each auction house runs real estate auctions differently. If you are interested in the properties being auctioned you can phone or email and obtain a list of those properties for sale. Usually the list includes the property address, a brief description and the starting bid. Keep in mind that the starting bid is not the reserve price. Also included is the “previously valued to” price which is taken from the higher of the last asking price of the property, the appraisal used in connection with the most recent mortgage or a broker price opinion. That price maybe wildly inaccurate in today’s market. You must register; bring a $5,000 cashier’s check and a personal check in order to bid. A “buyer’s premium”, usually about 5%, will be added to the winning bid. Be sure that you read ALL the fine print contained in the brochure, properties are usually sold “caveat emptor” (let the buyer beware). It helps to have a real estate agent with you that is an expert in market value in the area you will be bidding. Like all auctions, bidding is fast and furious and it is important not to be caught up in the action and over bid.
It’s been my experience, that many, if not most REO (bank owned) properties have been listed with a real estate brokerage prior to going to auction. You have to do your research prior to going, including visiting the property & doing the comps. Although the Auctions are usually set up on a schedule, it can also be very time-consuming on the day of the event., depending on which properties you’re interested in and when they come up for bid.
There are loads of REOs currently on the market that you can see in half the time with half the effort and pay the same, if not less. I have set-up custom searches for my clients who are looking strictly for bank owned. They can view them online & select the ones that meets their criteria. We then set an appointment to see 5-7 of them. When they find one they like, I’ll run the comparatives and make an offer. The bank usually responds within 3 days. They also price them to move them. The last one I put an offer on, I estimated was underpriced by 15%, so we made an offer at 5% over list price and got accepted. It even appraised for 15% over and just closed yesterday (in less than 30days)!