Action at the Auction Part #1
A special first this week, my brother is guest writing about his experience at an Auction to share the true story behind the courthouse steps. Let me know what you think!
This week we had the opportunity to observe a live auction of foreclosed houses hosted by Auction.com in Chino, CA. The newsletter will take a two-part approach to auctions with the first part highlighting some of the benefits to pursuing this path of buying property.
The list of available houses for auctions can be found online through several websites and each site may require you to come prepared with proper documentation. On the day of the auction, registration took place approximately one hour prior to the start of the first sale, with buyers filling the courtyard to get close to the action. For the auction hosted by Auction.com, they provided about five employees to help answer questions and verify completion of paperwork. The auction is open to the public, which is free to attend for anyone interested in learning more about the process. Of the handful of people I talked to, most were prospective investors and came to watch the auction for their first time.
Upon registering as a guest, the employee asked if I had brought a cashier’s check, which is required for purchasing a property at live auction. No financing is available on properties purchased at auction, a cashier’s check made payable to the bidder as a natural person is required (you cannot bring a check made out to a legal entity). Their recommendation is to bring multiple cashier’s checks in varying increments since any overage in sale would take about 7-10 days to return.
As an example, if you expected a start bid of $250,000 you could bring one check for the full amount and then several others in increments of $5,000 or $10,000. Additionally, the employee notified me that several properties had been postponed and the full list of postponed properties would be announced prior to the start of bidding.
Going once, going twice, sold!
The auctioneer announced the start of the process with sincere advice that each buyer properly understand the terms and conditions of the auction process. Thirty-seven houses were scheduled for auction on the day I attended, and a laptop showed the crowd of 40 a live update of the house’s status.
The first twenty minutes or so of the auction consisted of the auctioneer reading a list of houses, which were postponed for three primary reasons: beneficiary request, bankruptcy, and mutual agreement. The most popular by far was beneficiary request, followed by five bankruptcies, and one mutual agreement. After the list of postponed houses was read, a few members of the crowd walked away, probably hoping to purchase one of the houses before it was postponed. The one house that I was most curious to see at auction was listed well below market value in a nice area of Chino Hills. During the break between listings, I learned this auction was cancelled without explanation.
The live auction kicked off with a strong starting bid at $150,000. Without any interested parties, the creditor was the highest bidder at $230,000. During the hour-long auction, only five properties were live auctioned, three going to creditors and two going to participants in the audience. The two winners in the audience mainly competed with one other bidder, and the auctioneer increased each bid in what I considered small increments of $1,000.
After the first hour, notice came in of two properties that were postponed and the final properties were categorized as pending until further notice.
Advice for Buyers
The day of the auction can be tense and there are multiple considerations to take into account prior to buying a home at auction. Do as much research as possible before raising your hand to bid on a property. Review the title history through a preliminary title report/county's recorders office to determine who owns the title and whether you have the right to purchase it clear of any other liens. Another piece of advice is to inspect the property by following legal guidelines. If tenants are occupying the property, you most likely will not be able to tour the inside; however, websites like Zillow and Trulia may show you pictures if the house was recently sold. Auction.com also typically has at least one photo and driving by is a smart idea.
Once you secure the cash needed to purchase the property, a phone call to the auction website will usually help answer most questions about proper paperwork. The greatest benefit of purchasing a house at auction is in the potential to have equity in the property from the day of purchase. As an example, one of the properties sold at auction was purchased for $85,000 below market value!
Although I did not see a fast talking auctioneer in a cowboy hat yelling at the crowd to spend more money, the process of attending a live auction was fun and gave me a better understanding of the auction process.
Stay tuned for the next newsletter, where we address the potential roadblocks and risks of buying at an auction!
We Buy Homes!
The title says it all. Many of you know that the team here actively invests in real estate. So, we want to let you know that in addition to helping you buy or sell a home, we also purchase real estate! If you ever have a piece of real estate that you are thinking about selling, feel free to give me a call directly at (650) 430-5322.
MinnGo is HIRING!
We are looking for licensed REALTORS to join the team. We are not your ordinary brokerage. But, if you know smart, hungry, ambitious individuals looking for roles as sales associates or property managers, please pass on the word. We are not looking just in San Mateo but are branching out and expanding coverage from Gilroy in the south, Napa in the North, Half Moon Bay in the West, and Stockton in the East.
If you have not already had the chance to check out our new website, take a look! New Website
If you ever have any questions, or anyone you know is interested in buying or selling a property, please do not hesitate to reach out or share our contact information. At MinnGo, we realize that real estate is not something our clients think about everyday. Lucky for you, that is what we live and breathe.
Until next time.