December 2008

Bring Facts, not Emotion to Buy Foreclosure Property at Auction

There was another ad sticker on the front of the LA Times today for REDC Foreclosure Auctions, http://www.USHomeAuction.com . There are many others, but I am familiar with REDC, as several of our Countrywide Bank Owned properties were assigned to them back when the Bank was testing Auction sales vs. traditional sales. Seeing the sticker reminded me of one Auctioin Buyer, who called me after the sale, as I was still responsible for the closing transaction. He asked me if I thought he paid a good price. I deflected his question and asked him if he was happy with the price he paid, and he was, so I left it at that, Honestly, I felt he had paid too much for the property. He paid $25,000 more than the last list price in the MLS, which was $225,000. Buyers: You can get a good deal at Auction, but don’t get caught up in the crowd & the enthusiasm. There are deals to be had, but Do Your Homework.

Research the properties, in advance, and go to the scheduled Open Houses. At a minimum, do your own inspection of the property, and be prepared with a top price you are willing to pay based upon recent Comparable Sales of like properties. And don’t forget to factor the “Buyer’s Premium,” typically around 5%, into your top price.

Did you know you can bring your Realtor to represent you? He or she can run the Comps in advance, and the Seller will pay the Realtor’s commission. Someone by your side, to keep you ‘grounded’ in the confusion can save you money.

Finally, don’t assume that the pricing at Auction is going to be lower than market value. The prices for the properties are assigned the same way others are, and mistakes are made on both the low and high side. The properties will not be sold to the lowest bidder automatically - there is a minimum dollar amount on the homes, which tells me the Sellers are not willing to ‘give them away.’ I had several properties reassigned back to my team for traditional sale when they did not sell at auction because the minumums were not met.

Make an educated bid, based on facts and research, and not emotions. If you win, you will likely walk away feeling good about the deal you got.