In California, you need the money up front which cuts down on the competition, which is still cut-throat, and bidders do bid dangerously close to FMV, which is OK if you plan on living there, or are bidding for a buyer-occupant. If we only needed 2500 to bid, the whole city would show up! That being said, do your homework! Is it the 1st loan being foreclosed on?
If it’s the 2nd, how much is owed on the first? What about liens, etc? Good luck, crunch your numbers, and know what your highest bid amount will be BEFORE you go.
I have a question about a local auction that is being held in the Boston area. The auction house is a local company and the property is a 3 bedroom, 20 year old single family house valued at approximately $300k. It seems in fairly good condition from the outside, but who knows what is inside. The last sale price I could find online is $200k in 2000 (not sure if there is a 2nd mortgage on the property).
Does the auction start out with the amount owed and take bids from there? If no one bids at the opening price, do they go lower than what is owed? Do the auction companies have to accept any reasonable offer, or do they have to take no less than x amount?
Re: Auction Question - How Do They Work? - Posted by David Krulac
Posted by David Krulac on June 04, 2006 at 09:13:53:
often times the auction will start as low as $1,000. Usually aouund here at least teh first price out of the auctionerr’s mouth is the price they hope to get, like $300,000. Nobody bites and he keeps going lower and lower.
The competion at auctions often times drives the price above market. Call it auction fever. Read the book How to Sell you house in 5 days by William Effros. I reviewed this book on amazon.com
I still go to auctions but baragians are hard to find.
Now if you’re really talking about foeclosure auctions, things are different there. You need to be more versed on the state of the title and liens. Usually they require all cash within a few minutes or a few days. Getting a mortgage is not a possibility. Whereas in the non-foreclosure auction you have maybe 45 days to settle and can get bank financing for your purchase.
The house is being put up for auction by whoever holds title. The auction company is selling on behalf of the title holder.
If the title holder has a minimum price – called a reserve – then the property will only be sold if someone bids higher than the reserve price. It is not up to the auction company to accept any reasonable offer.
At auctions I have attended, the auction price starts low, as low as $2500. The low starting price allows more attendees to participate and drive up the bid. The auction company is hoping that a couple of participants will catch auction fever and start a bidding war.
If the last bid does not go higher than the reserve price, the auctioneer may announce that the reserve has not been met. The title holder may choose to enter negotiations with the high bidder at that point, may choose to close the auction, or may choose to reopen the auction to see if the bidding progresses higher. The auction company will just follow their client’s instructions.
If there is no reserve price, then the auction is called an absolute auction. Often the auctioneer will announce that the auction is absolute. In an absolute auction the high bidder wins, no matter how low that price may be.
This auction we’re looking at requires a $2500 cashier’s check (or cash) at the auction, so maybe that’s the opening price. Other homes up for auction by this company have different deposit amounts due ($5k, $10k, etc) and seem to be relative to the value of the homes.
The total amount due is due 30 days after the auction date, according to their website. We are going to try to pay cash or use hard money, but that all depends how the auction goes. We only want the property if we can get a deal (to rehab and resell); I’m sure if owner-occupants will be there, they’ll be willing to pay a higher price.
The $2500 deposit is an earnest money deposit…in some cases it means if you bid and fail to complete the deal you are out the $2500…be careful and be sure…Investigate BEFORE you invest.