Went to the courthouse steps

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Submitted by jeeman on July 7, 2009 - 7:21pm

Well, I went down to 220 W. Broadway today to see how the RE auctions work. The first guy only had 3 properties, and two of them were postponed. The third one was a $1.4M starting bid on a property in Vista. Crickets were chirping, and his "going once, going twice, back to the beneficiary" took about 4 seconds to say.

Then a 2nd guy came along 15 minutes later. He had all the other properties. He front-loaded all the properties of the beneficiaries who had representatives standing there on the courthouse steps. Most of those were open for bidding, but again, crickets. One property was bid on by the guy next to me, and he went a penny higher than the opening bid. The auctioneer said he had to bid for the "bennies" and bid opening bid + $1000. The other bidder backed down, and the property went back to the beneficiary.

Then he went through a long list (about 30 or 40) of delayed auctions. One property in Chula Vista seemed hot and 3 people bid it up from $330k to $410k.

All in all, interesting to me. I had some questions for anyone able to answer them:

1) How can you get a loan to purchase a property if you don't have the cash to buy it at the auction?

2) Anybody know what the different categories of delayed auctions means? From memory, it was "mutual agreement", "bankruptcy", "trustee discretion", and a couple others.

Thanks,
Jeeman

Submitted by pepsi on July 7, 2009 - 8:44pm.

I don't know the answer of your 2nd question, but I know the first. There some possible answers:

1. No, you can not buy a house, because you can not get a lone.
2. Ask your uncle for the loan.
3. Find some hard money lenders.

My question though is where do you get the list of the auctioned houses ?

Submitted by moneymaker on July 7, 2009 - 8:52pm.
Submitted by patientrenter on July 7, 2009 - 9:15pm.

"How can you get a loan to purchase a property if you don't have the cash to buy it at the auction?"

How do I buy something for more than I can afford? In the right economic system, the answer is you can't. But the fact that there are other valid answers in our current economic system tells me we're a very long way from recognizing our problems, let alone fixing them.

Clearly, if not having the purchase price for a home doesn't tell you ANYTHING about whether you can afford it, then we still live in a world that's way too leveraged.

Submitted by Effective Demand on July 7, 2009 - 9:34pm.

1) Hard money lenders. Expensive and short term. Usually require high down. Look around SDCIA and Innovest for people to help

2) http://www.foreclosureradar.com/ca_forec...

Submitted by chaozz on July 7, 2009 - 11:33pm.
Submitted by Effective Demand on July 8, 2009 - 12:15am.

patientrenter wrote:
"How can you get a loan to purchase a property if you don't have the cash to buy it at the auction?"

How do I buy something for more than I can afford? In the right economic system, the answer is you can't. But the fact that there are other valid answers in our current economic system tells me we're a very long way from recognizing our problems, let alone fixing them.

Clearly, if not having the purchase price for a home doesn't tell you ANYTHING about whether you can afford it, then we still live in a world that's way too leveraged.

You definitely will have to be patient, patientrenter, if you expect people to have the cash sitting in the bank in order to buy a house before you buy.

That said for the OP, since they don't have the cash they would have to get a pretty darn good deal and the trustee sale because hard money will definitely cut into that deal. And you will be competing with the sharks at that point for the "good" deals.

I was at the trustee sales here in Ventura today, 5 of 9 sales went to 3rd parties. The competition is very active (though today was an anomaly).

For San Diego, I have the trustee sales broken out between revert to the bene and 3rd party sales. It gives you an idea of whats going on right now:
http://effectivedemand.blogspot.com/2009...

Submitted by jeeman on July 8, 2009 - 9:11pm.

Ok, the point is that most of us have to get a mortgage to afford the house we want. In order to buy a house at the auction, you need the cash upfront. patientrenter, this isn't a "mindset" problem...I don't have ALL the cash, even though the bank has pre-approved me for a mortgage. Do YOU have all cash for the house you want to buy? Or are you, too, going to get a mortgage?

I would need to bridge the gap for however long (hopefully a couple days) between the auction and funding of the mortgage.

That was my real question.

Submitted by SD Realtor on July 8, 2009 - 9:38pm.

jeeman typically hard money lenders will lend on about 60% of the "value" of the home. Thus it is not out of the question that you could indeed get a loan from a hard money lender, purchase the home at auction and refinance it with a conventional mortgage and pay off the hard money loan.

Note I am not recommending you do that, because everyone conveniently oversteps the risks with purchasing a home at trustee sale. However if you do it right, you can save a hell of alot of money.

Submitted by moolah on July 27, 2009 - 3:54am.

Try some hard money lender.

Submitted by moolah on July 27, 2009 - 3:59am.

I have Hard Money Lender List. Visit my site, http://moolahlist.com for more information.

Submitted by sdrealtor on July 27, 2009 - 11:28am.

How is your flip going?

Submitted by obie619 on July 27, 2009 - 1:18pm.

Longtime reader, infrequent contributor. I plan on attending the trustee auction at the downtown courthouse on 8-5-09. I was originally interested in bidding in on a listed property as a primary residence. After talking to a friend who has purchased trust deeds, I am now attending primarily to educate myself on the process. My friend's advice is to avoid trustee sales unless you have the knowledge to research the status of a property's title yourself or are committed enough to a given property spend the $600 to $800 to get a report from a title company. I am not so enamored of the house I was originally going to bid on to spend that kind of money on the off chance of getting it at auction. Attending the 8-5 auction will provide me with some background on how the auctions work which may prove useful if I do find a jewel of a house sometime down the road and there is enough lead time to verify the title information. I'll report back on my auction experience.

Submitted by urbanrealtor on July 27, 2009 - 2:11pm.

In addition to the inability to finance these (hard money legbreakers notwithstanding) any successful bidder is subject to any liens on the property (or even the defaulting borrower) that supersede the trustee's deed.

Some (like tax liens) can be added to the title up to 120 days after the trustee auction.

The inability to inspect the property, finance, or get title insurance usually means discounts that are an order of magnitude lower.

Again, in my experience.

Submitted by obie619 on July 27, 2009 - 2:34pm.

Thanks for the information about superceding liens. I didn't know they could be added on upto 120 days after the trustee's auction. All the more reason for me to stay away from such auctions until I know more about the ins and outs of them. My original attraction to the auction process was to avoid the bidding up on asking prices that has been occuring lately when properties are marketed via the MLS. RealtyTrac currently shows 45 properties going to trustee sale in the next 10 days in the zip code I am primarily interested in. Maybe some of the "shadow" inventory will finally come up for sale. I'll continue to be patient so as to buy a decent house at a good price.

Submitted by sreeb on July 27, 2009 - 10:16pm.

So, assuming I have the cash, do I have to have it in a briefcase one the court house steps? Seems like these guys would be getting mugged on a daily basis.

What are the actual mechanics of paying?

Submitted by SD Realtor on July 27, 2009 - 11:13pm.

Bring cashiers checks. Have them made out in your name. If you have a winning bid you simply sign them over to the trustee. It is not rocket science. Take a few denominations. You get the change back along with the deed in about 10 days.

Submitted by Effective Demand on July 28, 2009 - 9:25am.

urbanrealtor wrote:

Some (like tax liens) can be added to the title up to 120 days after the trustee auction.

IRS has the ability to buy a property back for what you paid for it for 120 days if a junior tax lien is on the property. It isn't like the trustee sale buyer is liable for the taxes in that situation.

In my research, if you know the chain of title at the time of sale, know what lien you are buying and the value of the property you are buying you have things covered. The fact that title is perfected on 8am the day of the sale as long as the trustee's deed is recorded in 15 days saves a lot of worries for any junior lien action.

While you have to do your diligence I don't think the issue is as scary as people make it out to be.

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