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Buying up forclosed properties at auction on the courthouse steps?

Discussion in 'The Okie Corral' started by Gino, Jun 18, 2012.

  1. Gino

    Gino Millennium Member

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    So I keep hearing about this, so tomorrow I'm going down to watch the process. Today I went up to the county clerk's office and looked through a book of upcoming auctions. Anyone ever done this?

    1) You have to pay 5% cash at time of auction, and the rest by 4:00 that day.

    2) It is hard to see which properties are up for auction, cause the court papers don't always have the address of the property listed.

    3) You can't go to the property and go inside to see how much work needs to be done.

    4) You don't know if someone else has a lien on the property before buying.

    Seems to me to be a lot of risk!
     
  2. jpa

    jpa CLM

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    If you're talking about tax deed sales, I've done some research on it but never actually pulled the trigger and did it myself.

    1) It's all cash only. It ties your money up for at least 24 months in most places during the redemption period. The good thing about that is that you're earning interest at least. If you're doing it as an investment, you hope the property owner or mortgage holder coughs up the money and pays after 23 months. If they pay immediately, you only get that month's interest and you have to wait til next year to reinvest that money.

    2) Every list I've seen here has the parcel # (PIN) and address listed. If only the parcel # is listed, go to the assessor's web site and look it up.

    3) True, you're gonna get the property "as is" and you have no idea what it looks like inside or what the damage is. Even worse is that if you buy a tax deed and have to foreclose and evict the homeowner, there's no telling what they'll do to the property on the way out. Since you don't know what condition it was in before they moved out, you don't know if they did the damage.

    4) Tax deeds take priority over other types of liens. Mortgages all fall below tax deeds on the ladder of "who gets paid what when".
     

  3. Gino

    Gino Millennium Member

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    No, these are not tax deed sales. These are bank foreclosures, and the bank sells the deed on the courthouse steps. I don't know how they end up there, I'm hoping there will be other GT members who know more about it than me...
     
  4. Ghost Tracker

    Ghost Tracker

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    That's how a LOT of County Sheriffs leave office substantially more wealthy than when they entered. Don't get me wrong, there's nothing unethical or illegal going on, they're simply is a GREAT spot for timing & info to be "Johnny-on-the-spot" at The Courthouse. It also explains why they'll spent large amounts of their own money to get a job with a relatively small annual salary.
     
  5. DScottHewitt

    DScottHewitt EMT-B

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    That right there should be a red flag.
     
  6. Gino

    Gino Millennium Member

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    There is a way to check at the county clerk's office if a property has a lien on it, I just don't know how to do it yet. There was a small FAQ given out at the courthouse, and it mentioned getting a title search company to check out properties, but that sounds expensive/impractical to do.
     
  7. 220-9er

    220-9er

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    Often the bank holding the mortgage will bid up to the mortgage amount. That is usually over the value of the property. Besides that there are all kinds of other potential problems with the title that could come back to bite you later.
    A better way is to buy from the bank after they have cleared up the paperwork. You can still find some steals that way if you are patient and do your homework.
     
  8. teumessian_fox

    teumessian_fox

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    If all this is precisely true, there are so many red flags it's hard to know where to start.
     
  9. RottnJP

    RottnJP Lifetime Member

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    Where I am it's 10%. The details of the process vary by state/county.

    It must list a parcel/deed/lot number. You go to the clerk's office and look it up from that.

    This probably varies by jurisdiction also. Here, the foreclosure auctions are done at the property. It opens early so you can check it out, then the auction starts. But the terms of the auction will be stated on the notice, and you can contact the cognizant attorney to get documentation of the rest of the details of the process & terms. His name is on the notice too. At a minimum, you can view it from the curb, but the cognizant attorney can give you the specifics of what you are permitted to do in your jurisdiction.

    You have to check that out at the clerk's office, too. It's not hard to do, but you have to be prepared to spend an hour or so going through the documentation in the records room. The clerk will have to show you how to use their system the first time, so be nice.

    (That should go without saying- In general, administrative people can make your life easier or more difficult based on many variables, so it's foolish to aggravate them needlessly.)

    Pro-tip: Take a good camera or camera-phone to make "copies." I have an app on my phone that scans right to a .pdf. This saves time and money having the clerk make copies at $.10 per page. IMO a professional title search is a huge waste of money. At worst, copy every page and take it to your attorney. At least that way you learn something for your money.

    All in all, it's not too bad. The info you need is all in the public domain, but you have to be prepared to do some legwork ahead of time. Initially, at least, you will want to contact an attorney regarding issues/concerns you don't understand. And, you have to be well enough funded to show up with a big check and know you can get the rest by the end of the day.

    Listen to your attorney carefully, ask about things you don't understand, and learn from him. A few hundred bucks of legal education is cheap compared to effing up on a real estate purchase because you didn't understand the ramifications of your actions. Don't be "penny wise and pound foolish."
     
  10. larry_minn

    larry_minn Silver Member Millennium Member

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    I get updates about Sheriff's Auctions of property. They give address, minimum bid, and any long term assessments. I.E. "$25k payments over 10 yrs"
     
  11. random southpaw

    random southpaw

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    I often do research on title at County Courthouses. The key item from the above quote to remember is that the owner, whose taxes are not yet paid, has a time period (varying from state to state) which can be 2 to 3 years for them to "redeem" that debt. If they do redeem that tax debt, your money was tied up for all that period with no positive outcome for you. On the other hand, if you manage to successfully purchase the property, you may have an amazing deal!

    It's your call to make. Good luck!
     
  12. RottnJP

    RottnJP Lifetime Member

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    OP was talking about foreclosures, rather than tax sales. I've never heard of a multi-year redemption period- That's nuts. Here it's six months, and I've heard of it being a year in other places.
     
  13. DScottHewitt

    DScottHewitt EMT-B

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    It seems like the bank couldn't sell it if someone else has a lien, unless THEY pay off the lien......
     
  14. Z71bill

    Z71bill

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    I think you may be mixed up -

    Most of the time -- not always - I will guess 8 out of 10.

    The bank is foreclosing on the property and is "BUYING" the house not selling it.

    If Joe & Jane Blow have a $195,000 mortgage - and they are not paying - the bank will foreclose - and "buy" the house for the outstanding balance the mortgage.

    This allows the back to eventually sell the house - the term used is -- REO -- Real Estate Owned --

    The bank may end up selling the property for less than the mortgage balance at some point in the future.
     
    Last edited: Jun 19, 2012
  15. RottnJP

    RottnJP Lifetime Member

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    When you buy a foreclosure you have to look at the terms carefully. You typically are buying the *bank's* ownership stake in a foreclosure. You may get the property free & clear... But if there are open liens, you typically assume those when you take title- Unpaid taxes being a common one.

    Caveat emptor.
     
  16. GAFinch

    GAFinch

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    Chat up someone there a couple times who already does this...if you convince him to let you buy him lunch some time, he'll likely share some pointers with you...there are usually more than enough houses to go around.
     
  17. Z71bill

    Z71bill

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    Not true in many cases.

    The bank has no ownership position BEFORE the action -

    The reason for the public auction is to sell the property and settle outstanding liens - who ever bids the highest at auction will the own the property -


    The mortgage held by the bank will almost always have the first lien position -

    So if the bank is owned $195,000 and some guy that put a new roof on the home (never paid) is owned $5K - his debt will (most of the time) get wiped out in the foreclosure.

    That is the reason they do a public auction - it is the reason it is handled this way -

    If someone bids $250,000 for the home (bank bid the mortgage value of $195K) then the bank would get their $195K - the roof guy will get his $5K and the homeowner would get the rest. In this market that is not very likely. If the home was really worth more than the liens the homeowner would have sold it and paid everyone off.

    The one exception is tax liens - they don't just go away - it will depend on state law. \
     
    Last edited: Jun 19, 2012
  18. Dennis in MA

    Dennis in MA Get off my lawn

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    It may be different today, and in various areas, but I BELIEVE the bank puts in the first bid - for the outstanding first-mortgage amount.

    No place in my AO is selling for the value of 1st mortgage in foreclosure. Always less.

    These were great ways to get property 25 years ago. In THIS property depression - not so much.

    Find out your local banks' REO dept contacts. THAT is how to do it. (I think BoA has theirs online.)
     
  19. Gino

    Gino Millennium Member

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    Okay, so I went down this morning and watched the process as it happened. There were a few guys there who do this for a living - buying and flipping houses. They had laptops open and were accessing everything on the net as it happened.

    The bank/lenders had their representatives there to start with the first bid. Always $100. Most of the banks/lenders would show you the maximum bid that they would go. It seemed that the banks would go unchallenged on their $100 bid and win most of the auctions at that price.

    It seems to me that this small county has a "gentlemanly agreement" not to run up the bids on the banks/lenders. I really don't understand this part. There has to be a reason that these guys weren't bidding up on the banks/lenders?

    On maybe 1/4 of the auctions, the banks had a lower maximum bid price than the home was worth. Then the "third party bidders" would start to bid. Seems to me that these guys were getting the homes for maybe $20 to $30 thousand less than market price.

    It seems that there were not too many homes that were really being sold today, most went to the banks/lenders.

    As a teacher, I have the time off this summer to go and watch the procedure. I'm actually looking for a starter/fixer-upper home around $50 thousand. Didn't see any today or on the list for tomorrow or Thursday.

    The quest continues!
     
  20. Batesmotel

    Batesmotel

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    The ones that no one was bidding on could have been second mortgages. You can actually bid on delinquent seconds in hopes to collect on them.

    I heard of a new investor doing it thinking he was buying the first. He lost everything.