House auction: any experience?

[Gardenarian]

Dh and I are considering making a bid on a foreclosed house that has gone to auction.
Has anyone done this before?
I registered at the auction site and bidding start March 29.
I would love to hear about your experience, or any advice you might have.

[ToomuchStuff]

I went to an auction up the street, in which the home was also sold/auctioned. This was a few years ago, and it was different because you could examine the home. (walk around inside it and take a look) In that case, you could have brought some one with you that knew what to look for. It brought a lot less then they were anticipating and this was before the "market crash". (around $40K less)
Without seeing it, you certainly need to know the market, and I would go try to talk to the neighbors (they might have insights to layout or condition problems). Seen several short sales and currently trying to find out some information from a real estate friend that specializes in them. (thinking of making an offer of ten cents on the dollar, for neighboring house with foundation issues, to tear down, for the lot). Most of those have required a LOT of cleanup and may or are missing copper and things.

I'd like to find out what one I know about sold for. It went for auction, after the foreclosure process on an estate. They seem to take a while, before the records are searchable online.

[Gardenarian]

Unfortunately we are unable to do any inspections or even get inside the house. I have inspected it from the outside as well as I can. It appears to be in good condition though will require some clean up. We are going to set a firm limit on our bidding and try not to get too worked up if we are outbid. It's scary not knowing what we are getting into but also seems like too good a deal to pass up...

[Aqua Blue]

I had a family member buy a auction foreclosure. They were able to walk thru with a realtor . In this part of the country if the heat was turned off, which is often the case, the plumbing is destroyed. They knew that going in, and actually got a good deal. They do all that sort of thing themselves..

[rodeosweetheart]

We have bought two foreclosures now without having set foot in them. We hadn't even been able to drive by, they were at such a distance.
Both have been lovely houses, so sometimes, you can get lucky!
I don't recommend it, but seriously, they have been two of the best houses we have bought, at considerable discount.
Not for the faint of heart, though.

[awakenedsoul]

That's inspiring, rodeosweetheart. I haven't bought a house at auction, but my neighbor across the street did. He told me that he bid $250,000. on a house that's now worth much more. It's probably doubled in a year. He's in construction, though, and did all the work on it himself. The couple who owned it before lost it. They had renters in there as a last resort, and the renters trashed it. Now it looks beautiful. They're great neighbors, too.

[Gardenarian]

Well we went out and took another look at the house today. It's located really near my cabin, but has a better layout and more privacy. If we can get it for under $220,000, we're going to go for it. It's right in the heart of the redwoods. I may be asking for buckets of trouble, but if all works out I will sell my current cabin and we'll be able to afford this one without taking in any AirBnB renters, and it will probably be one of our retirement homes.

The way it is shaping up it looks like we'll also buy a small place in Colorado near my dh's family.

I'm excited to see how the bidding goes. The house was valued at around $500,000 but bidding starts at $130,000. I have no idea how it will turn out. If it gets over our limit I think I'm just going to have to stay away from the computer till the auction is closed!

[awakenedsoul]

That's exciting, Gardenarian. I taught at a camp in the redwoods near Russian River and it was gorgeous! It sounds like an excellent price. CA real estate really does go up in value, if you are able to buy low...keep us posted!

[rodeosweetheart]

Gardenarian, what happened with the house?
AFter this thread, I saw an auction on a house in Maine and thought, what the heck and went to look at the auction site--it was a great house, opening bid 15000, valued at 137000. Weirdly enough, the auction was in the last minute when I switched onto the site. The house went for 66,000, which was good, but not fantastic, for an auction--or is this the norm for where these end up?
Would love to hear what happened and where the house ended up selling.

[Gardenarian]

Well, it was interesting. There seemed to be only one other person bidding. They bid $185,000, but that didn't meet the reserve. My dh tried to put in a higher bid (it was still 15 minutes before the closing) but he couldn't get it to work.

Anyhow, the reserve was never met, so the house is still sitting empty. I called the realtor who had been representing, and she said they were hoping to get somewhere in the high $400-low $500k range - which is way more than we would be willing to spend (or what the house is worth.)

I think it's kind of stupid to put such a low opening bid. The house was briefly listed on MLS for $236,900, and I think people were expecting to pay that, or less. The realtor said they just put in the lower price to attract more attention (didn't work!) Since you need cash or pre-approval, most people would only be in a position to bid up to a limited amount.

Since the house has no heat (except fireplace) and is on a lonely dirt road, it is not the kind of house that is going to appeal to everyone. They have it way over-priced.

It's supposed to go to auction again. I asked if they would take any offers on it in the meantime, but the realtor said no. I really don't understand their logic...

[ToomuchStuff]

Depending on the auction rules, if an offer has been submitted, it is pending and can't be offered for auction (so I have been told).
Not sure why you think it is dumb to put in a low opening bid? Software that does bidding, typically has a setting to "bid up to", and if you get it low you save money.

[Gardenarian]

I think setting an unrealistically low price is dumb in this case because people need to have some idea what they are going to spend to get a loan pre-approved. It also attracts mainly people who are only interested in houses that fall within a certain price range.

This house was listed on Realtor.com at less than $240,000 (though that was another little trap; they weren't actually taking offers.) But listing it that way did suggest that the house would sell for that amount at auction, or less.

As I said, this house is in a remote area, had no inspections, and there was only one other person (apparently) bidding. I think they need to lower their expectations.

The previous foreclosure we bought was listed at $299,000 on MLS and we got it for $160,000 (regular offer, not auction) - the bank thought it was a safer deal than going to auction with it.

[rodeosweetheart]

I think setting an unrealistically low price is dumb in this case because people need to have some idea what they are going to spend to get a loan pre-approved. It also attracts mainly people who are only interested in houses that fall within a certain price range.

This house was listed on Realtor.com at less than $240,000 (though that was another little trap; they weren't actually taking offers.) But listing it that way did suggest that the house would sell for that amount at auction, or less.

As I said, this house is in a remote area, had no inspections, and there was only one other person (apparently) bidding. I think they need to lower their expectations.

The previous foreclosure we bought was listed at $299,000 on MLS and we got it for $160,000 (regular offer, not auction) - the bank thought it was a safer deal than going to auction with it.

I am extremely impressed by your offer on previous foreclosure-- that is much, much lower than I thought would work. Maybe I ought to think lower when I think about these things.

I forgot about the reserve auction on the house in Maine. It said "reserve not met." So I agree with you, why put the opening bid on at 15000, then have a reserve higher than 66,000, on a house valued at 137,000. I agree, it seems a game, not a real auction.

Here is link to house in Maine:
http://www.auction.com/a15/search?auction_type=residential&search=casco+maine&auto_flag=no

[awakenedsoul]

I don't have experience buying houses at auctions, but I am watching this thread. We've had a lot of new people move into our neighborhood who got their houses at super low prices. They have been much better owners than the people who bought high. It's made such a difference. Good luck!

[catherine]

Nice Maine house! We spend our family vacation in that area last year, and it's really nice. Good deal for someone.

We bought our house next door for MIL when it went up for foreclosure but that whole experience was not fun at all. We thought we got a great deal, which we did at the time, but that was just at the edge of the cliff of the housing bust, so now, the house is pretty much worth what we paid for it, and maybe less still. (But we own it free and clear).

I don't particularly like the idea of buying foreclosures, because they represent someone else's misfortune, but I recognize that someone has to buy the house to close the loop on the whole thing. My own house went to foreclosure almost 30 years ago, and I was happy to see a nice young family move into it and enjoy it. For me, living in that house was like being in limbo for three years.

Anyway, I do think you have to know what you're doing to buy foreclosures--rodeosweetheart--looks like you do!

[lmerullo]

I, too, am watching this thread. We bought our current home the normal way and have lived here almost 30 years. In 2006, we bought a foreclosed home out of state as a vacation home for a great price. The home was listed at $39,900 - but had structural damage and had been foreclosed and then bank owned on the market for three years... we offered $11,500 - they countered at $19,900 and we finally offered $16,100 and got the home. In the next month we put $10,000 into it to get the home up to code, so our final price was $26,100. As soon as we were done, one of the locals offered us $65,000 for it! (We didn't sell). We are told the value now is about $85,000.

Having said that, we are looking for a second home near our primary residence and I feel it's totally an insiders world... we have watched while three homes all changed hands without ever making it to the public listing stage... someone knows someone and tells investors, who bid and buy before the auction. Quite frustrating, since #1 - we want to buy too and #2 - they buy really low, which ultimately lowers the value on my home...

Does anyone have any good ideas on how to get into the "insiders network"?

[rodeosweetheart]

lmerullo, I did not even know there was an insider network! Not sure how one would plug into that.

Anybody done a Hubzu auction? I almost bid on one yesterday but I don't understand how it works yet--what the commissions are, and why the house got taken off the last auction--it said it was a 5 day auction but then the price went down 10k on the starting bid. My friend drove out and took some pictures and it has some good features for a long term investment, but I don't quite "get" Hubzu yet. Looks like there is a 5.4 buyer commission to Hubzu and a 299 dollar "tech" fee, but you still need an agent, and do they get another 4% commission? Confused.

[Gardenarian]

We have found our houses on Realtor.com. I recommend only buying in areas that you know really well - like your own neighborhood, or a place you visit frequently. Really get to know the market. In both of my cases, it was just coincidence that these houses were foreclosures. Foreclosures and auctions will not always give you the best deal. There was an excellent deal on a great vacant lot that was a regular sale - it had been on the market a long time so I didn't rush on it, and someone else bought it.

I'm pretty frustrated by the outcome of this whole thing. The 'highest bidder' (who should have been us, but for a computer glitch) is now in negotiations with the bank for purchase. So, we lost out. I told my dh that I just wanted to put what we could pay right out there, but he wanted to play the auction game, and we lost. Not his fault at all, but.....

I feel this whole system would be much improved if people were straightforward and honest about their prices, offers, and expectation. The banks would, I believe, get better prices and buyers would have a little more control.

One thing - if you are thinking of buying a foreclosure, auction or otherwise, make sure that you are not responsible for evicting the residents. I would not make any offers on an inhabited property.

There are very decent realtors out there, but, in general, the whole property investment game is pretty dirty and lacks transparency. Caveat emptor.