Reader Jay saw that auction.com is now conducting trustee sales, and wanted the scoop.
It’s not surprising that lenders bloated with properties would be attracted to the allure of ballroom auctions. They seem like a great idea – let’s gather around a bunch of novice buyers in a big room and create a frenzy.
But the format is the same as buying at the court house steps, where you have to pay all-cash only, and no title insurance. At least at the regular REDC ballroom auctions they let you finance the sale, and close 30 days later with title insurance – which opens the door for the amateurs.
Most of the all-cash repo buyers are pros. They aren’t going to be persuaded by the usual REDC antics of guys in tuxedos running around like monkeys to distract you from the common thread – that they have shill bidders. From their FAQs:
Q. What is the difference between a Credit Bid and the Opening Bid?
A. Under the law, the beneficiary under the deed of trust may place a bid or bids (directly or through Auctioneer) during the auction called a “credit bid”. Such credit bids can be made up to the total amount due the beneficiary, including the Trustee’s fees and expenses. The “Opening Bid” is an initial credit bid to be placed at the auction, but does not represent the maximum credit bid that may be placed on behalf of the beneficiary.
While it is legal to do this at the court house steps, lenders typically are too busy/disorganized to attend the bidding, let alone manipulate it. But shill bidding is standard practice at all REDC auctions, so I would think it’ll be attempted at these auction.com trustee sales too. But will the pros go for it?
You know my policy – I don’t believe anything I hear, and only half of what I see. So I checked it out for myself. At the last REDC auction I attended about two years ago, I stood in the front corner and looked back at the audience – that way I would only hear the auctioneer’s bids, while looking for the actual bidders. It is a farce – most auction prices were run up without corresponding bidders in the audience making the bids.
But I do give them credit – they tell you that they are doing this in the fine print, if you read and understand it. But most amateurs are too excited over “getting a bank deal” to realize what is being done to them.
If you’d like to check it out for yourself, here is the link to the first attempt – the lenders threw them nine garbage properties for starters:
P.S. The auction company REDC purchased the website “auction.com” for $1,000,000 to use as their entry into regular residential sales. But like with their ballroom auctions, they put the 5% commission on the buyer. How is it working? According to the MLS, they have closed one sale this year, a 2br condo in Allied Gardens that they listed for $99,000 – it closed for $64,000.