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!
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I live, work and play in Walnut Creek, CA! For Real Estate and community information about this beautiful city as well as the surrounding areas, please visit my website at www.TerriAdamsScott.com
Hi Terri - I have attended several of these, and have been the "auctioneer" on some, which in California are held by whoever the trustee is on the trust deed. As a broker, I substituted in as trustee on benalf of an individual lender, and did the entire foreclosure on several occasions. Each trustee holds their own auctions, and that is why there may be several at the same time.
Sometimes no potential bidders even show up. When that happens, the trustee still has to announce the property and minimum bid to the empty stairway, wait a bit, announce that there are no bids, and that it is thereby sold to the lender. It feels funny to do that - especially with people walking by that hear you talking to no one, but by law it must be done.
Great Idea to video this. I represent buyer/investors at every auction. Its a process for sure in the shark tank.
Great Idea to video this. I represent buyer/investors at every auction. Its a process for sure in the shark tank.
Susan - thanks so much for taking the time to stop by and making your comment. I was very intriqued by the whole process and had many more questions than we had time to ask! I guess I'll have to go back and attend a few more!
Laura - So, my perspective on the sharks wasn't exaggerated? LOL Thanks for commenting.
In Ventura County there seems to be a certain few agents that have been doing this for years and have it down. They are able to get most of the properties that come up. Thanks for the post.
Scott - thanks for commenting. I'm getting more tempted to try this for a few of my buyers who are up against 20+ offers on bank owned properties!
Thanks for posting this, Terri. I always thought the "courthouse steps" thing was fiction and that people went there with knives and guns :) This was extremely educational. Thanks again.
Jane, thanks for stopping by and commenting. BTW...it was a chilly day so I don't know what they had under their coats! Ha!
Terri, what a great post! Like most agents, I've never been to a courthouse steps auction, and I learned a lot from what you wrote and your video.
Patricia - thanks for stopping by and taking the time to read and comment on my post. It was a great learning experience and there's still so much more to learn about it.
Terri, I have thought about going to an auction to check it out too, but never have. Now I don't need to. Thanks for your notes on preparing before you go.
Rich, thanks for stopping by and it's an event worth experiencing!
Hi Terri, I also went to an auction as a learning experiemce - and that it was ! I went with a buyer who was experienced with auctions. He only researched the property he wanted and was very aggressive. Great experience !
Bill...did your buyer win the bid? I hope so! Thanks for commenting.
Terri - I came over from Pat's post and found this facinating. This is not for the faint of heart of the uninformed. I am inspired to try this myself. Great post
Terri- Thanks for writing about this. I almost made it to a court auction when a short sale deal I was working on simultaneously was slated for foreclosure. My buyers and I were all ready to try "Plan B". Fortunately the foreclosure sale was cancelled. And given your post, very fortunate for them...I/we would have been ill prepared.
Thanks for the post. I've always wondered what the auctions on the courthouse steps we like, but have never been to one.
One of the realtors in my office is starting to bid on foreclosures on the court house steps. It's not for everyone, but sure interesting.
Very interesting, Terri. A lot of the auctions in this area are at the foreclosed homes. Thanks for the tips on navigating the waters!
Is the minimum bid always the amount owed to the lender? It is amazing that this process still happens in such an outdated fashion!
Terri - Great Post! I've never been to an auction before, what an experience, not for the faint.
Claude - Go for it!
Marcie - sorry that your short sale fell through...maybe it will come back on auction soon!
Renee - you're welcome...it's worth the outing!
Kay - there are some great opportunities...when the homework is done.
Kathryn - I tried to attend an auction companies sale at a home once, but they wouldn't let me in! Their rules required I either have a buyer with me or be bidding myself. So much for a public auction! The home didn't sell!
Lynn - that's a good question and 'heresay' told me no...they can set their own minimum bid.
Thanks to all for taking the time to stop by and comment!
It is a very interesting experience to attend the auctions. The other thing I found interesting the first time I attended was the huge percentage of properties that are either canceled or postponed.
Michelle - thanks for your comment and yes, it is an experience!
Thanks to Patricia Kennedy's post on "missed posts" or I would have missed this.
I've been wanting to go see for myself how these procedures are conducted on the Courthouse steps and your great description has me more interested than ever. In general I think it must be depressing if you consider the families that have been affected that had no intent on losing their homes but lost jobs, etc.
Sue of Robin and Sue
In our area, individual foreclosure auctions are conducted at Title Company offices. They tell me it's rare for anyone to show up, but I have friends who showed up 3 times for the property next door to them and each time found the sale postponed. We wondered what that was about because we know the former owner isn't interested in keeping it.
Another agent and I once attended the auction of properties siezed by the County for back taxes... interesting and funny. The bidding went so slowly that we kept forgetting which property they were working on. One of the County commissioners was the auctioneer, and when he didn't get bids he'd stop and say things like "Hey Bill, I know you want this one, so come on. Raise it another hundred." After the auction we talked with him and he was really angry because some investor purchased land that he knew a young couple needed. It was next door to their place and their spring was on that property! He said that guy had no business bidding that property up beyond their reach when they needed it!
Yes, it was an odd day.
First of all, let me thank Patricia for highlighting this blog in her featured post.
Terri:
Now you have topped the chart. I would have recommended it for a feature myself. You are quite an investigative reporter. Thanks for
Terri, I have been to a lot of them. I went to my first one for the same reason that you did to see what was going on. I now go once or twice a week. I have been doing this for about 8 months. I am yet to see anybody buy anything on the courthouse steps. Everything, and I mean everything I have seen sold at the Courthouse steps has been sold way over market. The lender has bought back the property in every case. Everyone of these properties has been listed later for much less than the Courthouse price. Why you ask do I go if I am not going to buy? It is a GREAT place to prospect. I almost always meet people who come hoping for a deal. When they find out there are no deals at the Courthouse, then I have a great chance to convert them to clients.
I also read Pat's post about the missed posts. Glad I did not miss this one!!!
What a great learning experience. Some of the auctions here that are at the actual property are by the foreclosure company or third party company who is handling the property AFTER foreclosure has already taken place.
Terri,
This is a very well written post about the auction process. I have never attended one on the courthouse steps, but have participated in one at a property location. The opening bid was higher than anyone was willing to pay, so the auction was almost over before it started. The bank bought it back and it was listed on MLS a few months later for much less. Kind of like what Tom said above!
Judy
Robin and Sue: Yes, it hit us in the heart too that many of the properties belonged to families!
Christine: You would think they'd have a better system in place where cancellations could be posted prior to the sale.
Marte: The 'bidding up' is part of swimming with the sharks...so they tell me! I'm sorry the couple didn't get the land they were bidding on!
Lloyd: Thanks and I am honored that Patricia recognized and mentioned my post!
Tom: Yes, I can imagine it would be a great prospecting tool...good luck to you!
Barbara and Judy: It's interesting to hear how different areas handle the auction and foreclosed sales. Many of the properties didn't have any bidders, but many were sold at bargain prices. I guess that's where the homework of the bidder comes into play. Thanks for commenting!