Posted by Paul on January 18, 2010 at 17:02:10:
Frank, Thank You for your input! This is great
Question/Advice about Foreclosure Auctions - Posted by Paul
Posted by Paul on January 14, 2010 at 18:56:22:
I attended my first auction in Brooklyn New York and sat through maybe 10 foreclosure auctions. I came away with some questions. Are you the investor responsible for researching any other liens which may be present on the property? There is a judgement amount which is declared before bidding starts, I assume that this is the first mortgage amount? Or is it all the liens combined…and this is minimum the bank will take?
I guess the general question is. What due dilegence should you the investor do prior to making a bid on a home at a foreclosure auction? Any advice will be appreciated.
Re: Question/Advice about Foreclosure Auctions - Posted by Frank Chin
Posted by Frank Chin on January 15, 2010 at 19:58:12:
Paul:
The foreclosure investor is absolutely responsible for finding out what’s going on with each property he plans to bid on. I live in Queens, NYC, and the home I currently live in I bought at a foreclosure auction. The issues are:
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Normally, you buy as is. In many cases, you get to inspect the property, but in many others, you don’t.
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You’ll have to know the outstanding leins on the property, including:
– Outstanding mortgages.
– Back tax leins (real estate, water, sales tax etc.)
– Mechanic liens
– Lien of other creditors such as Mastercard, AMEX etc.
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Make sure you check for outstanding violations. They could be as minor as loose doorknobs on the front door ( I got a property with a loose doorknob violation), or as major as not having a C/O (certificate of occupancy).
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Where to find the information?? In the old days, I have to go to the County clerks office for the public records, and the Building department for violations. Now you can go into the Websites summarized here:
http://www.nyforeclosures.com/resources/nycrecords.html
– Violations can be critical, or you might find yourself in a world of trouble. I have visited the Building dept on properties I’m interested in, and had them double check because sometimes “environmental” violations may not be entered.
- Make sure you know the rules of the auction:
– Minimum bid: As you you mentioned, often banks stipulate a minimum openig bid, usually, the amount of the first mortgage.
– Under reserve: You can bid any amount, but they can reject the bid afterwards. I submitted quite a number of “under reserve” bids, all rejected.
– Absolute bid: You can bid any amount, and the highest hid cannot be rejected. I bought my house under an “absolute bid”, paying $210K, with the bank holding a $290K mortgage.
– Buying “free and clear”. The seller agrees to pay off all the liens. I bought my home “free and clear”. The bank paid off about $35K in tax leins for me.
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Condemnation: Depending on the condition of the home, condemned homes have been sold. I know of this happening to two people I know. After they bought the house, came back a few weeks later, found the house demolished, and the city sending the owner a bill for demolition. This is because condemnation orders are not normally listed in the public records.
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Buying public land: While on the subject of things not in the public records, a friend bought surplus land from a town at a public auction. He paid $300K cash. Turned out the land was already sold to the state. Well, despite a search of the public records, nothing showed up because it is recorded in another book that people don’t know about. Yes, he got his money back two years later. When the problem surfaced, the town told him “sorry, we don’t have money in the budget this year -it’s all spent”.
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Know your zoning. A house can be in violation of zoning rules but not yet cited (but will be if a neighbor squawks), such as having 3 apartments in a two family house. Or you might be buying a single family in an area zoned for 2, thus worth a lot more.
I hope this synopsis would give you a good starting point.
NY foreclosure “services”? - Posted by John Merchant
Posted by John Merchant on January 14, 2010 at 19:40:06:
Surely NYC has a number of REI services that, for a fee, will provide all this info to the potential investor.
So pick up one of the NYC RE magazines or newspapers and see if you can find one of their ads.
Your question is a good one as there is certain info that the careful investor wouldn’t dare be without before bidding on any one of the auction properties.