Info on Auctions.. - Posted by Richard Ragon

Real Estate Investing Auctions
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Posted by Richard Ragon on July 08, 2006 at 13:54:29:

The term ‘cartel guys’ comes from the Russ Whitney crew. I didnt take a Russ Whitney course… just had a really good friend who did, and I saw some of the course outlines in which coined this phaze… cartel guys. They recommend you stay away from the auctions too, and their whole thing was not taking ownership of anything… find it, lock up deal, flip to an investor.

I haven’t hear the term 40 thieves since the 90s ‘Dave Del Dotto’ days… :slight_smile:

I dont think thats going to happen in the current market… There’s a ton of people showing up (the looky loos) and they cant pay off everyone. I have seen the cartel duking it out amoung themselves though, and sometimes one guy is making people made by bidding 100 bucks over eachtime, this usally makes this other cartel guy made and he takes a huge leap of 10K or 100K just to stop that… once years ago I even saw an auction stoped, the trustee says, “Sir if you dont stop talking to the other bidders or I’m going to throw you out of here”…

I’ll tell you in a private email if you like, but I dont want to announce my gold digging claim in public here.

Off the subject but, also… I’ve noticed larger amounts of Women at the auctions these days… Good for them! Nothing make me made more than the current mentality of our society instructing women to find a guy and hook on!!

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Info on Auctions… - Posted by Richard Ragon

Posted by Richard Ragon on July 03, 2006 at 22:18:09:

I live in Califonia. I’m thinking of buying some homes at a foreclosure auction. Noticed a large amount of home “on the block” these days…

Got a lot of questions…

  1. I do some research by going over to the county recorders, where I can pretty much guess if the auction is a first or a secound loan going to auction. If I end up buying a secound, what happens to the first? Do I have a right to the home, or did I just buy a paper?

  2. If I buy a first, does the secound disapear?

  3. Lets say I buy a first with no secoound, does this make the leins disapear? IRS tax liens stay?

  4. Noticed a fair amount of people going bankrupt, but this doesnt stop the foreclosure… if I buy one with a filed bankruptcy, does this complicate anything, do I loose anything? How does this effect the sale?

  5. Lets say the owner is still in the house? I’ll offer money to leave, but what if he refuses?

  6. Do I need any insurance for a flip?

I’m sure I’ll think of more later… Thanks everyone.

-Richard

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Re: Info on Auctions… - Posted by Joe Kaiser

Posted by Joe Kaiser on July 05, 2006 at 01:37:23:

Understand you’re buying a property, not a first or second. It’s the
property itself that’s up for sale so forget about this “buying a first”
notion.

Typically, all liens junior to the foreclosing lien are wiped out, but
things like redemption rights can influence the outcome of the sale.
You’ll need to understand precisely how things work in your area
before committing real dollars here.

IRS liens are nothing special and are treated like all other liens, except
that IRS can unwind the sale within 120 days if they so choose.

Bankruptcy stops all sales virtually without fail. You’ve misunderstood
what is taking place. Lenders are frequently released from the
bankruptcy action and allowed to proceed, but that only happens with
the court’s approval.

You’ll have to deal with the owner if he’s still in the house. That often
means evicting an owner who won’t cooperate.

Joe

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Re: Info on Auctions… - Posted by Richard Ragon

Posted by Richard Ragon on July 05, 2006 at 05:09:50:

Thank you for replying to this Joe, hardly anyone seams to know about this avenue of investing, either because not many people are doing it, or not many of these siminars recomend this route.

I dont understand, when you say “Understand you’re buying a property, not a first or second.” If you bought a secound mortage at an auction, and its junior to a first, how is it that you bought it? Perhaps Im missing something. Will the first contact you and ask for payment on the 1st? Do you assume the 1st, and they now ask you for payments? So your saying that while risky, you do buy the house, and it’s yours? If you dont pay the 1st, they foreclose on you now?

I dont think there are redemption rights in California. Never heard of that, but Im no expert. And I certainly can be wrong. Where can I find out about this?

What do you mean IRS can unwind the sale?? I was under the impression that they might ask you to pay up on IRS taxes. could be wrong.

I have no idea what your talking about on bankruptcy and an auction… Theres a sales number posted on sales. I call the number, and a sale was postponed “due to bankruptcy”. The sale is still there just delayed, and it goes to sale sometimes a little later… what does this mean to me if I win the auction on the postponed date?

Should I be contacting an eviction attorney before, so as to have have my ducks in a row. Do I need to do anything to speed up that process should I need to go that route? Once I win the auction, I’m assuming that I need to move fast, as to flip the house.

Thank you for your reply… From the lack of responce I got from this question, it looks like not many people are investing in this route. Is there any good books on flipping houses in California out there? Siminars or speakers?

Thanks

-Richard

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Re: Info on Auctions… - Posted by BTI

Posted by BTI on July 05, 2006 at 12:03:07:

Richard

Wow, you are a newbie, so lets get a little education here, go to the library and check out all the books on foreclosures, most of them I’ve seen are written from the california perspective.

At a California foreclosure sale(auction)the lender is selling the property not his note and trust deed. He is only bidding along with everybody else but he gets to determine the opening bid and he can use whats owed him to pay for his bid. Of course any senior liens will survive the sale and will determine the amount you want to bid.

Plus these are all cash sales, you win the bid you pay now. Once the sales over there is no redemption period, however it is possible the foreclosure process had a flaw and the former owner can have the sale canceled.

As for not many people doing it, you will find out there are a ton of people doing it, last sale I went to had about a 100 people and 3 properties.

You can’t bid if there is no sale taking place, so a postponed sale for bankruptcy or any other reason will be rescheduled and annouced according to state law. The IRS has 120 days to tell you that they believe there is enough equity in the property to take it over, they will take over at the price you paid, no credit for your holding time, that’s on the house. And yes, a senior lien holder can start their own foreclosure action if they want to due to the due on sale clause.

BTI

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Re: Info on Auctions… - Posted by Richard Ragon

Posted by Richard Ragon on July 06, 2006 at 02:29:14:

Yes Brian, I am new… for everthing there is a start.

The library has lots of books on foeclosures, but I’m afriad the vast majority are more than outdated at 10+ years old. I prefer Borders. Any recomendations?

BTW: Last auction… I was the only bidder there. House I was looking at got canseled… bummer. A vast majority of people at the sales (I discovered) are only looky loos.

I’ve spent the last year working on my credit score (currently 820), and aranging some lines of credit, and I have some loose unanswered questions still…

Thanks for the reply
-Richard

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Re: Info on Auctions… - Posted by David (Los Angeles)

Posted by David (Los Angeles) on July 05, 2006 at 19:35:56:

> And yes, a senior lien holder can start their own foreclosure action if they want to due to the due on sale clause.

I pretty much agree with everything you said, except for this statement. Buying a property at auction on a foreclosing junior lien does not trigger the due on sale clause. You buy the property subject to the senior liens. As long as you make the payments on time, the senior lienholder cannot foreclose.

To the original poster – PLEASE PLEASE PLEASE get a good education before you go wading into a trustee’s sale with a briefcase full of cashier’s checks. This is the arena where the big boys play, and they’ll eat you alive if you don’t know what you’re doing. It’s really not the place for a novice. You are usually buying the property sight unseen, with all its flaws and no guarantees.

Ward Hanigan has excellent materials on the subject for the California buyer. If you’re in Southern California, you can catch one of his free talks. He speaks on pre-foreclosure (equity buyout), junior benificiary buyout, and buying at the sale.

Bruce Norris also has good materials for California buyers, including how to establish relationships with REO brokers for properties that the bank takes back.

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Re: Info on Auctions… - Posted by BTI

Posted by BTI on July 06, 2006 at 12:33:09:

Richard

Even though the books are 10 years old there haven’t been any major changes to California foreclosure laws that I’m aware of.

Secondly, if your going to do this, go to the nearest law library and have the staff help you look up the laws and make copies, you will be up to date.

The last sale you went to had looky-loos because the experienced investors know to check with the trustee
before the sale and they knew it was cancelled thus no need to waste time showing up.

Great credit score, how is that going to get you the cash to bid at the sale? Payment due now, not next week or I.O.U.s taken?

BTI

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Re: Info on Auctions… - Posted by BTI

Posted by BTI on July 06, 2006 at 12:42:17:

David

The due on sale is triggered due to the change of ownership, and there is no doubt been a change of ownership, just because lenders don’t normally do anything doesn’t mean it can’t be done. No law state or federal exempts new owners from the due on sale just because they obtained it at a foreclosure sale.

And lenders attitudes may change, I know if I had a senior loan at 3% and the marketplace rate is now 9% I would have that new owner recast the loan or I would foreclose, and there is no law to stop me.

BTI

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Re: Info on Auctions… - Posted by Richard Ragon

Posted by Richard Ragon on July 06, 2006 at 02:35:20:

Can you aproch the serior loan holder and ask for a restructure after (or before) the sale?

I understand about “the big boys”. I have done a tramendous amount of homework on this. The area in which I’m looking, I make sure that the houses are not that old, and I dont expect to be doing major rehab. I do have several contractors lined up for fast rehab now too.

I’ll see if I can find out more about the names you stated here.

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Re: Info on Auctions… - Posted by Richard Ragon

Posted by Richard Ragon on July 06, 2006 at 13:22:01:

Hey BTI,

Understand on the California Law…

Got it on the library too… Thanks

I too know where to check, and I know how to get imediate up to date info on the sale… When I say Looky loo… I mean, there are 10-15 people there, and I have yet to see more than 2 people ever bid on the same house… Last Monday 1 guy even (only other guy there) asked me what I was buying… I asked him the same, and he even said that he was a lookie loo. I would have had me my first house for the opening bid, had it not been cancelled. I had the cash, and I was set!

I see the same cartel guys there all the time… The cartel guys, give out a yell when a house gets canselled, and I knew that house was cancelled hours before… I found that odd that I knew more about the houses then the cartel guys. Once I discovered that these cartel guys are no more smarter then me on the info, I figure I have the right to be there. The thing I lack is experiance.

Wells Fargo tagged me as a great credit risk and gave me several lines of credit. The kewl thing was, that once I got the lines of credit, my credit score went up again… which has got me even more credit now.

Slightly terrified about putting my personal line down, but like you said… no other way to buy foreclosures this way. In the current market, foreclosures are way way up… 14 pages now with 4 NOT on each page in the dataquick reports in my area. There’s even one “behind the gates”… starting at 1.9 million!! :slight_smile:

Thanks!

-Richard

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Re: Info on Auctions… - Posted by David (Los Angeles)

Posted by David (Los Angeles) on July 06, 2006 at 16:10:27:

And I know if I were the winning bidder at the trustee’s sale and you tried to pull that on me, instead of getting a steady 3% return, you’d be getting a lump sum for no more (and probably less) than the amount owed. I’d either refinance with a lender who hadn’t tried to screw me over, or I’d let the house go to sale. Maybe you’d get the full amount owed at the trustee’s sale, and maybe you wouldn’t. You certainly wouldn’t get any more, and you certainly wouldn’t convert your 3% loan into a 9% loan.

I assume you’re an investor, and as such maybe you’d welcome getting the house back in lieu of your outstanding balance. Most institutional lenders wouldn’t welcome it at all.

I’ve done some checking, and I guess I was mistaken. You are correct that there is no law (that I could find) that prevents a senior lienholder from invoking the due on sale clause when a property is purchased at a trustee’s sale on a junior lien. It would be shortsighted of the lender to call the loan under the circumstances, and I don’t think it will happen, but I guess betting against the shortsightedness of a bureaucrat is a sucker’s bet. Thanks for the education.

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Re: Info on Auctions… - Posted by David (Los Angeles)

Posted by David (Los Angeles) on July 06, 2006 at 16:34:07:

You may have done a tremendous amount of homework, but the questions you asked demonstrate that you still don’t know nearly enough to head out to the trustee’s sale intending to spend real money.

Some of those “big boys” aren’t the most ethical people in the neighborhood. They may stage conversations that you think you’re not meant to overhear to encourage you to bid on one property, or discourage you from bidding on another. They may overpay on property after property, just because their pockets are deeper than yours, and they don’t like competition.

You were asking about senior liens and junior liens. I’ve heard of newbies in California thinking they were getting a bargain at a trustee’s sale when they bought a house worth $350K for $270K, only to discover that there was a senior lien they’d overlooked (or worse, didn’t know enough to look for) for $300K. Some of those “big boys” who know better than to bid on that particular junior will line up to qualify right behind you when they see that YOU don’t know better, just to lull you into a false sense of security.

Look up the guys I mentioned, and attend a few auctions just to watch the process before you go intending to bid. When you think you know enough about the process, then you need to do your homework on the specific house you intend to bid on. Good luck, and go slow.

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Re: Info on Auctions… - Posted by BTI

Posted by BTI on July 08, 2006 at 24:30:16:

Richard

Sounds like your ready to go. Never heard the term cartel guys before but it fits. When I started we had the 40 thieves, and they played all kinds of games like bidding a property up and up and then when the new guy gave up and left they would start withdrawing their bids until it got down to the guy and the amount they wanted. I used to make enough money for my dating in those days just by showing up with a cashiers check for $10, all they saw was the check and they would pay me a $100 to take a hike (a weeks pay in those days). Of course california law doesn’t permit that anymore, but it still goes on now and then.

What county are you planning to work?

BTI

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Re: Info on Auctions… - Posted by Richard Ragon

Posted by Richard Ragon on July 06, 2006 at 17:40:27:

>>>You may have done a tremendous amount of homework, but the questions you asked demonstrate that you still don’t know nearly enough to head out to the trustee’s sale intending to spend real money.

I form my questions in a way that I believe is going to bring in the most responses… I also ask some questions that I know the answer too, or at least know enough about already, just to have a way too judge if someone is jerking my chain. What you mistake as not knowing or appear not to know, might be just a question that designed for me too look for a specific answer from someone. Sorry, if Im not forthright, to be honest this is somewhat of a protection mode, as playing dumb has it’s advantages sometimes. :slight_smile:

>>>Some of those “big boys” aren’t the most ethical people in the neighborhood. They may stage conversations that you think you’re not meant to overhear to encourage you to bid on one property, or discourage you from bidding on another. They may overpay on property after property, just because their pockets are deeper than yours, and they don’t like competition.

I’m aware of these tactics… To tell you the truth, I don’t care what they do, I’ll have a prop picked out and a price already picked. If I win, kewl… if not… so what… some guy overpaid. If they start overpaying each time I show up, the joke is on them and eventually they’ll wise up to me I’m hear to stay. Buying at the sale is the only way that I can ever buy… you guys going knocking on the doors are nuts… :slight_smile:

>>>>You were asking about senior liens and junior liens. I’ve heard of newbies in California thinking they were getting a bargain at a trustee’s sale when they bought a house worth $350K for $270K, only to discover that there was a senior lien they’d overlooked (or worse, didn’t know enough to look for) for $300K. Some of those “big boys” who know better than to bid on that particular junior will line up to qualify right behind you when they see that YOU don’t know better, just to lull you into a false sense of security.

Hey… I’m not randomly going to auctions to just pick out houses. When I show up, I have a property in mind, I’ve pulled the title from 3 sources, I’ve walked over to the county recorders office and looked it up myself (been looking at titles for 10 years now), I’ve pulled comps for the area including the taxes, a top map of the blocks, and have on occasionally even gone by the house and taken a photo while looking at the owner, just too see if he’s still there…

>>>>Look up the guys I mentioned, and attend a few auctions just to watch the process before you go intending to bid. When you think you know enough about the process, then you need to do your homework on the specific house you intend to bid on. Good luck, and go slow.

I’ve been actually attending these auctions (as a lookie loo) myself on and off since 1995. I’ve been tracing the properties from the legals pre and post, and even watching where the houses go, who they sell too, how much they sell for, and I have even figured out what kind of profits these cartel guys are doing by following up on them.

I’ve been sitting down on the side line watching for so long that I even know several of the cartels names, and I know what cars they drive, and have even spotted them on the road driving some times. I even know what the Trustee drives too.

… its time to make a move.