San Diego foreclosure auction - expert advice

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Submitted by 70Degrees on July 15, 2017 - 4:48pm

Hi folks,

I'm interested in a property that _may_ be going to foreclosure auction. I understand there are many pitfalls and caveats to this process, including that it may never hit the auction. This specific one is compelling enough for us that I can justify some time & money investigating further, but I need help.

Any recommendations on who I could engage to help perform diligence and help guide me on the actual bid process. Fully expect to pay for such help -- just not sure what kind of person has this expertise -- real estate attorney? Realtor?


Submitted by gzz on July 16, 2017 - 3:08pm.

Few properties actually get foreclosed in a rapidly rising market, and even fewer are sold at a good price.

Submitted by recordsclerk on July 16, 2017 - 3:53pm.

If you looking at a single property, it would probably be a total waste of your time. There are 3 things that can happen at a sale. The auction can be canceled, postponed, or go to sale. If going to sale, it can sell for higher then you are willing to pay. The opening bid is undisclosed. Usually the bid amount listed is the loan amount. That doesn't assure you that it will open at that price. It may actually open lower, but don't get your hopes up. If it is listed under market there will be bidding.
It is cash sale, so you will need to bring cashier's check for the full amount. Most likely more than the full amount. They will send you the change in a couple weeks.
You are not bidding on a home, you are bidding on the loan. Know that you will need a title company to make sure you are bidding on the senior loan. That is part of the risk. You will need to pay property taxes if overdue. That can be checked on the County Website. A title company can make sure that all other liens are junior to the loan and will be wiped away during the auction. There are IRS liens, but those are not risky.
I would subscribe to foreclosure radar. You can do a lot of research on their site. I would still seek a title company to confirm that you are bidding on the first loan. You can see how many homes go up for auction and how many actually get sold to the public.
That should help you decide if it is worth it. From what I remember about 1 percent of the homes get sold and the other 99 percent are either postponed, cancelled or sold back to the bank. That was also the good old days, I'm sure it's less then 1 percent today.

Submitted by 70Degrees on July 17, 2017 - 11:21am.

Thanks, I appreciate the response. This is a single property, and I understand odds are low that it actually hits auction. It's also likely that if this one did hit, it would be beyond our budget, but it's unique enough for us that I'm willing to go through the effort just in case, and I consider it a useful educational exercise anyways :)

Property taxes I've already checked on, it's the lien situation that I need help navigating. I'll join foreclosure radar and engage a title company. Thanks

Submitted by njtosd on July 17, 2017 - 2:12pm.

For what it's worth - I would always recommend consulting with a real estate attorney if there are any issues that you have any question about. An attorney makes money whether you buy the property or not, so they are more likely to give you an objective viewpoint. I would recommend this whenever a property is purchased, but certainly in this case, which has a huge element of "let the buyer beware". (I am an attorney myself, although not of the real estate variety, and have followed this advice in the past. It saved us from making at least one very bad real estate choice, and maybe more.)

Submitted by sdsurfer on July 18, 2017 - 12:39pm.

Some good advice above, but I thought I'd throw a little optimism in the hat since it seems you do feel this is a unique opportunity.

FWIW...I think you have the right mindset thinking that it's a longshot, but sometimes things work out if you give it a shot and are a bit optimistic. I'd do as much research as you can yourself online, but I'd probably also talk to a realtor you know and get some advice for free since they do not get paid unless you close escrow. I think the model works because they have to earn your business by providing some value before they get paid.

There are definitely horror stories about wasting a lot of time with auctions and getting overbid and all, but there are people that get lucky too. I know a guy bought a duplex in Encinitas down the street from me about a year ago for 845k and I"m pretty sure that guy scored considering a place on the same street just closed for 1.6. In the instance I'm describing it was through and you could have an agent represent you and you could get a loan on the property. There was a 5% premium and there were certain rules/disclosures you had to follow, but you could read all the rules online on their website. It was very straightforward in my opinion and I wish I would have bought the place myself, but I told myself my limit was 825k prior to participating and I had to stick to my limit when someone outbid hindsight I should have gone for it, but I also always think there is another opportunity.

Good luck to you!

Submitted by givdrvr on July 18, 2017 - 5:26pm.

Ballsy move..I admire your moxie. Good luck with it...let the board know how it turns out!

Submitted by gzz on July 19, 2017 - 12:02pm.

Another reason for pessimism is there are a lot of people who flipped foreclosures when it was common. They are still out there looking for deals but with more experience. If you end up outbidding all of them, might be a case of the winner's curse.

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