For those who were on vacation last week and are interested in trustee sales, we did an informative trilogy with Adam Rappoport. Click here to start at the beginning, and scroll up from there – and read the comments, Adam was very candid in responding numerous times!
https://www.bubbleinfo.com/2009/11/25/adam-rappoport-1/
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At first glance it would seem crazy to take the additional risks when buying at the court house steps, and once you consider Adam’s thoughts, they might convince you further!
But here are the reasons you should consider buying at the trustee sales:
1. Less competition.
Adam and the other flippers are competing intensely over the cheaper homes they can turn and burn. For those who want to buy a house over $600,000, the competition thins out quickly – those properties are more risky for flippers, and most buyers don’t have the cash or guts to purchase off the ‘steps.
2. More selection.
On the MLS there are only 1,311 active detached listings of detached homes between Carlsbad and La Jolla. On foreclosureradar.com there are 3,951 properties in the same area (567 SFRs on the auction list, and another 3,384 on the NOD list).
3. No listing-agent involvement.
The listing agents are running interference for the sellers. The pricing is all over the map, they’re reluctant to provide any real help, and they leave the bidding open for days or weeks. As a result, you don’t know anything about the competition, if any. At the trustee sale, if there is competition, you’re looking them in the eye, and can walk away as a homeowner.
4. All homebuying is risky.
The risk seems more alarming when you hear that you aren’t guaranteed a tour or inspection of the house, and there could be undiscovered liens. A regular transaction has safeguards, but all houses are sold “as-is” without warranty – the only difference is that you’d have more people to sue if something went wrong on a regular sale.
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As you’ve seen here I’ve been working on my own trustee-sale program for clients, where I help find the right properties, navigate the inspection/lien concerns, and help arrange for bridge financing.
I am being very deliberate in putting this together, and it’s coming along nicely. We are going to attempt 1-2 in December, and use video to help document the process so you can see how it works.
If you are in the $600,000+ price range and have at least 30% down payment (with a maximum loan amount of $697,500), then contact me for more details if you’d like to consider buying a house at the trustee sales!
If you think it sounds too risky, no problem, it is.
I don’t mind battling it out with you for those regular sales, and I think that’ll still be my primary service provided. But the activity doesn’t appear to be waning for the “quality” properties. Here’s a short-sale listing that looks fairly plain-jane in the photos:
Good news to some at close to $300/sq ft. I guess we’ll know the final price once it closes. I think it is good you are bringing up a service for trustee sales. I’m all in for clearing the inventory like a hot knife through butter.
I’m still uncertain as to whether you can get inside a house before it goes to trustee sale. Adam bought all of his without seeing the interiors, but I’m under the impression your video library is pre-trustee sale, correct?
I’m still uncertain as to whether you can get inside a house before it goes to trustee sale. Adam bought all of his without seeing the interiors, but I’m under the impression your video library is pre-trustee sale, correct?
If you have enough notice, you can get inside the house by knocking on the front door and convincing the tenants to let you in. Sometimes a cash bribe helps, but there may not be enough time to do this. I think that Jim’s plan is to have the videos ready to go so you can review and bid when the house comes up for trustee sale.
Some of the properties are on the open market, so it’s easy to see the interiors.
For others it may take some fancy dancing and/or bribery. I’m not going to expect buyers to be comfortable unless we have some sort of experience of what’s inside, especially a read on who’s living there.
Great service, the main barrier to trustee sales is definitely having to pay all upfront. They probably do this because they want the sale to be as final as they can be, but it locks out prospective buyers (and in theory lowers the price by keeping liquidity low). So anything that can be done to give people access to this is great.
That said it is risky because you’re betting that there’s nothing you don’t know about the place. Like an REO only with shorter notice and no official inspection.
JtR
What are you seeing south of the squeeze (Solana, Encinitas)?
Thanks
To casual observers it appears overwhelming when you see that there are 3,951 houses on the list between Carlsbad and La Jolla.
We’re working our way through the better ones, the next post will focus on the latest tour through Del Mar, CV, and Encinitas.
What I see everywhere are people going down with the ship, making no attempt to save themself. I’m guessing when that lousy loan mod finally appears from that crummy bank, it’s enough for the over-encumbered to throw in the towel and wait for the inevitable.
I don’t see many putting up a fight like there was something on the line.
JtR, you may already have thought of this, but the services of a lititgation search specialist can be valuable prior to bidding. Title reports and physical inspections don’t always disclose the whole truth. Good luck in your new market making endeavor – if anyone can do it right, it’s you.
I attended the madness at the Trustee Sale today–shut out–got outbid again. Much more crowded than it used to be and many more bidding wars–it is crazy how high the regulars are willing to go!
LB – how many auctions did you see that were over $600,000?
I didn’t stay for the whole auction, but today nothing $600K or over got bid on–everything I saw was $300K and under. I was bored-stiff and Jay thru several fits-that guy is a piece of work–they difinitely need a better system–now it is “No More Lawn Chairs”–“Don’t Block the Doors to the Courthouse”
Some people are putting up a fight (usually owner-occupants) – they skip 3 payments, ask for a mod, get reduced payments for 6 months, then stop paying. Takes about 9 months to actually get to trustee sale, then they file BK immediately before the sale. Takes another 5-6 months to clear the BK. So at least 24 months total. However, people who have multiple houses can’t drag it out this long for all of them, so those will go through more quickly.
A couple of interesting ones from Orange County last Monday:
3722 Quarter Horse Drive Yorba Linda $1.4m owed, opening bid $766,945 bid up to $997,000
3 Padre Place Fraudera Ranch $2.39m owed, opening bid $1,232,500 no bids (ouch!!!)
Very interesting IRE. How close was 997k to market value for Quarter Horse?
Since a house over 600k got bid up to presumably close to market value in OC, this tells me that the over 600k market in OC must be a little hotter than SD. Could these type of bidding wars over 600k at the steps start happening in SD next year if the inventory stays tight and interest rates remain low?
Going to be an interesting spring to say the least.
Bidding above $600 does happen, just didn’s see anything yesterday–Last year we bid several, all unsuccessful–here is one I remember in Arroyo Vista Carlsbad-3274 Avenida del Alba–the opeining bid was in the mid $600’s we jumped out at $775 (our max), they resold it at $931.
I don’t get why The city doesn’t cut a deal with a company like ebay and start putting auctions online.
Or for that matter make their own website.
It’s stupid that you have to be there in person to make an offer. What about people that work jobs outside of Real Estate. Major auction houses allow phone in bidders as long as they are qualified.
The more potential bidders available the higher the possible sale price can be.
Just another example of how stupid government is. If you streamlined the process and made the auctions entirely digital I bet you could get rid of 5-6 city employees sucking off my tax dollar nipple.
I liken the trustee sales to Black Friday deals – there are some incredible bargains and some nothing special. If a good opening bid gets published early, expect lots of interest, but if it isn’t published then it might get overlooked. The Yorba Linda house was probably about 10% below market value, but look how much the opening bid was below market value. Also there is a ready market for it. The one in Ladera is more of a specialty item which has a more limited buyer pool.
Here is a good example for today in SDC:
2410 Jefferson St. Carlsbad opening bid $890,800 Newer house on a very small lot. Will it get any bids? Not a super-special price but it is a discount to market value.
The city (or any other government agency) has nothing to do with these auctions. That’s why they take place outside the courthouse instead of inside it. It’s just tradition that they happen on the courthouse steps. They could (and frankly, should-and sometimes do) take place in the confrence room of a lawyer’s office or bank.
Shadash makes some excellent points about streamlining the auction process-It is an all day event–I spent 4-5 hours there yesterday in what should have taken 1 hour–if they could at least post a list (digital?) of the status of every listing so that they don’t have to manually read-off over 800 listings (with only 40 going for sale!)that would be a start. I am not sure if any labor savings, I believe that the auctioneer is paid by the Trustees directly–noone else seems to be involved.
Auctions for homes on Ebay or the likes? Not going to happen. Any saved labor will be offset by additional services as more listings are included. Can you imagine the potential liability when listing through a third party even though there are third party transaction guarantors such as purchase protection, pay-pal, etc… Big tickets items won’t fair as well.
Jim, can’t wait to see Encinitas REO/Short tour. In the last few months, I’ve seen distressed properties pop up in great neighborhoods.
I am referring to mass auction by the City in my previous post – not private/organic sales. I love ebay btw. Everything I listed for sale started at $0.00.
Sorry for the multiple post, but Jim are you going to include the Encinitas home featured on Extreme Makeover that may go to foreclosure? That is if One West Bank doesn’t hand over the modification paperwork. I heard from the news channel that the home will go to auction Dec 14.
“I was bored-stiff and Jay thru several fits-that guy is a piece of work”………..
LB…….I want the juicy details of a *Jay-the -auctioneer* melt-down.
As someone who had an altercation out there with him I am interested in hearing more.
Murf2222
Again, I agree with Shadash (and have made the case a number of times, myself).
IMHO, Fannie Mae and Freddie Mac should pre-qualify anyone who wants to bid on foreclosures. Each bidder is given a unique bidder# that is visible to all parties.
The houses should be listed for a minimum of 30 days, at which point the highest bidder “wins” the house. All liens should be made available as soon as they are recorded, and they should flag whether or not the property is vacant or occupied by renters or “owners.”
Since the taxpayers are backing everything at this point, everything should be government run, and everything should be fully transparent to all buyers, sellers, and market observers. You should be able to click on any buyer’s or seller’s ID# to see their sales and purchase histories, and how many bids they have out.
If they were smart, they would arrange for bridge loans through Fannie/Freddie (based on appraisals of the properties, and buyers’ qualifications), so that the spread between homes “sold on the steps” and those sold on the open market would greatly narrow, and banks (taxpayers) could recoup the profits that are now being made by flippers.
The only reason this isn’t being done is because the big-money types are making lots of money right now. God forbid regular families should be able to buy affordable homes. It’s obviously in society’s bests interests that specuvestors make profits, instead. /sarcasm.
Hi IRE,
Do you have any info on the Quarter Horse Dr. Yorba Linda Home? Is it up for sale or has it already been auctioned out?
I am really interested in it.
Sincere Regards,
Gina