Life in Walnut Creek, Lafayette and surrounding areas: January 2010

I have to admit, being a REALTOR is an everyday learning process!  One of the items on my bucket list this year was to attend an auction of foreclosed property on the steps of the County Courthouse.  I wanted to see how the process worked and whether or not you can get a good deal buying property this way.  I had been warned by fellow agents that it's a pretty tight-knit group there (investors) and they don't like new competition!  I was extremely curious so off I went with another Realtor friend and the following is our experience.

      Here's what I was expecting to see...One Auctioneer handling all the properties that were up for auction that day.  I also expected the bidders would have to sign up ahead of time and be given a number that identified them.  WRONG!

   We were also expecting some kind of a print out sheet or posted notice of the auctioned properties...WRONG again!  This is public information, but you have to get the information somewhere else...most subscribe to a foreclosure service.  So far, didn't seem to be a very organized auction in my book! 

One thing we did have correct is that the properties are truly auctioned off on the courthouse steps.  When we arrived, we noticed the (expected) glares and stares we received from a group that was huddled close together.  We figured those must be the serious bidders/investors and nicknamed them 'The Sharks'!  We picked out a couple of guys that seemed to be 'swimming in their own pool' and looked approachable.  We introduced ourselves, stated we were NOT there to bid and explained we just wanted to learn more about it for our own professional growth.  The two gentlemen were very kind and shared their expertise with us...not surprising because they were Real Estate Brokers and always willing to help a fellow Realtor!

Below is a short, 23 second video that actually shows an auctioned property in progress.  Depending on the number of properties to be auctioned, you may have multiple auctions going on at the same time. Each auctioneer announces the property address and the opening bid price. If you want to bid, you hand them a cashiers check and your ID. If no bids, the property is sold back to the bank.

Here's a little summary of what we learned if you want to venture into purchasing these auctioned, foreclosed properties:

1. Take swimming lessons...you will be swimming with the sharks! The serious investors are not bad people...don't get me wrong...it's just that they are very experienced and this is BIG business to them.

2. Have a team approach. If you're intending to bid on more than one property, you'll have to work in teams because while you're bidding on one property, the other one you want to bid on could be going on simultaneously with another auctioneer.

3. Research, Research, Research the property well before the auction. You will need to know if the property has any liens on it, are there occupants in the home, what's the condition of the property and very important...make sure you know that you're bidding on a First Loan (not a second!). To research all this, you need weeks of preparation and the right professional assistance.

4. Create a spreadsheet detailing all your estimated costs and desired profit percentage so you know the max you can bid to make it profitable. I saw a spreadsheet and there are costs that the non-professional bidder would NEVER think of!

5. Know the comparables of the property you want to buy. Once again, the normal consumer does not have accurate, quick access to this like a Realtor has. (I wouldn't rely on Zillow!)

6. Go observe the process first...maybe a couple of times...to see how it works and whether or not you feel intimidated by the other bidders.

7. This is a full-time job is you want to be a serious bidder and get into this as a Flipper...or you'll be another statistic in the Flopper group!

8.  These are CASH ONLY purchases.  No, you don't carry actual cash, but you will need Cashier Checks made out in increments of $10,000.

This was quite an eye-opener for me! I've always known that buying foreclosured properties at auction was a risky business if you didn't know what you were doing. You usually don't have the luxury of viewing the home ahead of time and have no property disclosures to rely on.

As entertaining and educational as this auction was, we couldn't help but feel sad for the homeowner who lost these homes due to unfortunate, financial circumstances. Their dreams and memories were being sold out to the highest bidder!

So, is buying foreclosed, auctioned property on the county courthouse steps a good deal? I'm sure it is...if you know what you're doing and have professional teams to support you.  Not recommended for the little tadpoles out there!

Congratulations...you've tested positive!  Your offer has been accepted, you're expecting a new home and you're now in escrow!  So what exactly is an escrow?  This is a question many First-time Homebuyers ask as they're new to the home buying process.

Well, it's kind of like the three trimesters of pregnancy.  It's a process you go through from inception of an accepted contract to the delivery of your new home. 

First Trimester (Days 1-17):  You just found out your contract was accepted and you're expecting the delivery of your New Home soon!  You've been planning for this special moment for a long time and now that it's becoming a reality you have all sorts of feelings and 'to do' lists hitting you at once.  You're happy, excited, scared and feeling a little overwhelmed because there's so much to do in such a little amount of time!  Well, contain yourself and take some deep breaths because these first seventeen days are crunch time!  You will be performing and reviewing all your investigative inspections, getting any remaining loan documentation needs to your lender, reviewing disclosures about the property, getting an appraisal...just to name a few!  Just like in pregnancy...this first trimester is dependent on whether or not this new bundle of joy is meant to be!  Don't worry...think of me as your birthing coach and I'll be there to guide and consult with you every step of the way.  Also, don't be alarmed should you feel a little morning sickness!  It's pretty natural and it will go away!

 Second Trimester (Days 18-28):  This is a lull time in which you will just be monitoring your progress.  Things have definitely calmed down and you will get some of your drained energy back.  This would be a good time to start packing up those items you don't use everyday.  Make arrangements with movers/friends for your big day.  Some things will come up that need your attention, but hopefully nothing too alarming.  Practice those Lamaze breathing techniques...to calm yourself and to prepare for that last trimester!  By the way, that morning sickness should have gone away...yippee!

Third Trimester:  (Days 29-40):  You're coming close to term and all last minute details need to be addressed.  Your lender is packaging your final loan documentation and communicating with the Title and Escrow Company.  Once all the conditions of the loan requirements have been met, your lender will have you come in for what we call 'the signing'.  This is usually the last 3-5 days before the 'birth' of your new home!  Exercise those fingers or you will cramp up from all the signatures you will provide!  Don't worry, an epidural won't be necessary in this labor...it's not an unbearable pain!  Once that's done, the loan documents go back to the lender and they do what's called 'funding' the loan.  Once the lender has 'funded', the following day (usually) is when the Title Company goes to the County to record the new deed into your name.  Once that is officially done...Congratulations...we have a successful "close of escrow"!  You did it and you are now the proud owners of your new bundle of joy!  As your birthing coach, I get the pleasure of delivering to you the keys to your new home!   

 (This is based on the scenario of a California, 40-day escrow...which is typical in today's market on a financed loan).