Foreclosure Auction

Foreclosure Investing 101 – Auction Sale Part 7 of 8

Stage 3 – Auction Sale

The actual auction takes place in a public location in some cases literally outside on the courthouse steps. Bidders must have cash in hand to purchase a property and this may mean multiple cashiers checks to cover the variance in potential final bid outcome. A property may have multiple bidders or none.

Opening bids are typically based on the total debt accrued on the property or a specified amount as designated by the lender.  A recent trend at the auctions has been “drop bids”.  In order to stimulate interest in the property from bidders, lenders will discount their opening bid.  Usually there are 4-6 properties a week where the lender has dropped their opening bid $20,000-$100,000 below the amount they are owed.

At close of auction the winning bid is the new property owner immediately upon handing over of funds. A receipt is given and a trustee’s deed will arrive in the mail typically within a week or two.

Special Foreclosure  Financing

Banks will typically not provide financing for a foreclosure sale.  We have developed relationships with several local funding partners to help you participate in a foreclosure sale.  We have agreements in place with our funding partners that will allow you to borrow anywhere from 75%, 90% and even 100% of the bid price.

Foreclosure,Foreclosure Auction,Foreclosure Auction Financing

Foreclosure Investing 101 – Postponement Part 6 of 8

Stage 2 – Postponement

The auction sale date can often be delayed or postponed.  Postponement can be from a few hours (i.e. delay in open bid receipt) – to many weeks. Lenders are strongly motivated to resolve a property’s default status prior to auction. The designated trustee or lender will often push the sale date out if there is a promising development or a discrepancy that prevents a timely sale.

Some of the more common reasons for a postponement are:

• Bankruptcy – The debtor files bankruptcy 
• Repayment plan – The lender agrees to a plan bring the loan current
• Forbearance agreement – Lender provides temporary relieve based belief borrower can somehow bring the loan current.
• Loan modification – Lender agrees to modify loan payment terms
• Pending sale – Lender delays action based on receipt of signed purchase agreement 
• Debt Dispute – The debtor formally disagrees with claimed debt owed
• Title Discrepancy Resolution – A title issue that has not been resolved prior sale date
• Litigation – Any lawsuit where a judge requests a stay on the property sale

With postponements occurring so regularly it is critical to have accurate up to date information on the properties. You could spend hours and hours driving around town looking at potential buys, only to find out the sale has been delayed a month or more. At Real Estate Investment Firm, we provide daily tracking and updates to all the properties in foreclosure in King, Pierce, Snohomish & Kitsap counties.  If there is a change in property status, you will know about it.

Foreclosure Auction,Sale Postponements,Real Estate Investing

Foreclosure Investing 101 – Foreclosure Timeline – 4 of 8

FORECLOSURE TIMELINE:

The foreclosure process is based on a set time line established by state regulations.

During the foreclosure period various actions must occur before the property can be sold at auction. At any point in time, the sale date can get postponed, therefore it’s crucial to accurately track property status to effectively buy foreclosure properties.

The foreclosure time line can be broken into 4 distinct stages:

1. Pre-Foreclosure Stage – This is the time to research the property, determine property valuation, and possibly contact the owner to negotiate a pre-foreclosure sale.

2. Postponement – A property sale can get postponed for numerous reasons such as: bankruptcy, title disputes or debt disputes. The trustee handling the property can delay the sale any time. Delays can be hours, days, or weeks so its critical to track property status.

3. Auction Day – Prior to the day of auction, it’s critical to have done proper research. Auctions are often held with properties being sold right on the court house steps. To purchase, you must come with "cash in hand" or have arranged special foreclosure funding.

4. Post Auction – Any properties not sold become bank owned properties "REO". Properties purchased are now owed by the winning bidder with a free and clear title. There are a number of actions which the new owner may now have to take.

In the following chapters, I will go into greater detail about each stage.

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Foreclosure Investing 101 – Foreclosure Auction – Part 3 of 8

Why Foreclosures Sell for Less Than Market Value:

In real estate, you hear the term "market value" quite a bit when discussing properties.  Everyone seems to know what market value means,  Most would say "it is the price that a given asset or property would fetch in the marketplace." and they would be correct. 

But you cannot stop there.. 

Market Value is the price that a given asset or property would fetch in the marketplace, subject tot the following conditions:

1. Prospective buyers and sellers are reasonably knowledgeable about the asset; they are behaving in their own best interests and are free of undue pressure to trade.
2. A reasonable time period is given for the transaction to be completed.

Given these conditions, an asset’s fair market value should represent an accurate valuation or assessment of its worth.

The foreclosure process and resulting auction do not come close to meeting the above criteria of a market value transaction. In fact, they are structured in a way as to virtually guarantee the lowest possible sale price. The following table will help illustrate my point:

Many investors would look at that and say "no thanks". "Too risky, and where would I come up with all that cash anyway." It is that attitude which explains why there are so many deals to be had at the auction. 

But what about the risks?

Granted, there are risks associated with purchasing property at the auction. But you can overcome the risks of bidding!  At Real Estate Investment Firm we have worked tirelessly to help open up the foreclosure market to the average investor. By providing our clients with detailed property status tracking, property research, title analysis and insurance, value assessment, auction bid calculator, access to foreclosure financing and much more we have helped our clients minimize the risks while maximizing their profit.

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Weekly Foreclosure Auction Re-Cap

Last Friday’s (11-09-2007) auction featured several fantastic deals. I had selected 11 properties last Thursday for my weekly “hot sheet”. Here is a re-cap of what happened to those 11 properties. 

7 properties were postponed. Five were postponed to a date in December and two were postponed to dates later this month.

1 property reverted to the lender. 

3 properties were sold to a third party.  Below are pictures of those houses and how much they sold for.

If you are interested in purchasing properties at the foreclosure auction then visit Real Estate Investment Firm and click the link for investor register.

Foreclosure auction

Foreclosure Filings Skyrocket 100% in Third Quarter

The third quarter of 2007 saw a dramatic jump in the number of foreclosure filings when compared to the same quarter last year.  According to RealtyTrac, the number of properties entering foreclosure spiked almost 100% during the last quarter and increased 30% from last quarter.

All indications point to a continuation of this trend as well.  In March 2008, the highest level ever of sub prime ARM mortgages are scheduled to re-set which will increase mortgage payments for hundreds of thousands of homeowners.  Many can expect to see there payments increase as much as 25%.  If the homeowner cannot refinance to a more conventional loan product, many will not be able to make the new, higher payment and thus continue the cycle of foreclosure.

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Is Foreclosure Auction Investing Right for You?

If your a real estate investor or property flipper and are wondering how you can still make a substantial profit in today’s softening real estate market you should consider purchasing your next property at the foreclosure auction.  The dramatic rise in defaults and foreclosures nationwide and the general downturn in the real estate market have created a “perfect storm” for real estate investors to make substantial profits by purchasing distressed homes at the foreclosure auction.  Every week a small group of savvy investors throughout King, Pierce and Snohomish Counties are routinely buying these properties for 25-40% off market value. 

For most investors, however, the foreclosure process can prove daunting. Excellent buys are available, but they require research, preparation, patience and persistence.  Without the right experience and specialized local knowledge the process of finding and evaluating properties, bidding at auction and funding the purchase can be intimidating and costly.  There is an awful lot of information to know in order to avoid the potential problems and pitfalls one can run into when buying foreclosures.  It is extremely important for an investor to get up-to-date auction information and act on it as quickly as possible.  A solid tracking system must also be in place since the chances are an investor will be evaluating and pursuing several properties at once often over a period of several months.

 Some of the important items every investor needs to consider when evaluating properties are 

1.  What is the market value?  What can I turn around and sell the home for?
2. What is the condition of title?  Are there unpaid liens and judgments you may become responsible for paying?
3. What is the condition of the property?
4. What should my maximum bid price be?

With the proper knowledge and the right team and resources on their side an investor can greatly reduce the risk inherent in purchasing foreclosed homes at the auction and reap the rewards time and time again.