Trustee Sales- Experiences

[Eric Kennedy]

Are there any folks on here that buy at trustee sales (auctions) in Santa Cruz or Santa Clara County? Have you had success with this strategy? What are the major drawbacks? Would love to hear your thoughts. Thanks.

[Account Closed]

Eric,

To answer your questions:

Yes to Santa Clara County.

Yes, I had some success. I haven't bought anything there since my last purchase in Jan 2012. Trustee sale prices started to take off in Feb. 2012. To put things in perspective, you can buy condos/townhouses for $120k-$130k at the courthouse. They were short selling these for $145k-$155k. Regular sales/flips were selling for $160k-$165k. By April 2012, these condos/TH were selling for $155k-$160k at the courthouse steps and flipped for $210k. I saw the writing on the wall so I started calling all pending short sales in February. I told them if it fell out of escrow, give me a call and I will buy it. I closed 4 short sale deals using this method between April and Novemeber 2012 for $150k-$158k and had 7 more deals in contract where I could only close 4 of them in early 2013 for fantastic prices. Did I mentioned that I ran out of HELOCs, private money, and had to borrow credit cards to buy these properties. Fortunately, the calculated gamble had paid off. Most of these have doubled in value. Of course, the trustee sale ones have more than doubled in value. Credit cards were paid off, private lenders were paid in full. I still have 50% debt on a HELOC. Hope to get it paid off by mid Feb.

Drawbacks? You have to pay all cash on the spot. You buy them as is, where is, with all the warts attaching to them. It's your job to do the due diligence before showing up at the steps. Did I mention that I tipped the auctioneers with red envelops on Chinese New Year? :)

Thought? There's practically nothing to buy at the steps now. 30-40 guys fighting for one property each day? No thanks.

In 2009 - 2011, everyone was taking turn to buy properties because properties were plentiful, and there wasn't as many investors/flippers. Investors/Flippers were making a boat load of money. SFHs were bought for $280k at the steps and flipped for $420k after getting some lipsticks. The profit margin on flips started to get squeezed in the 3rd quarter of 2011. Things started to get tight after the 3rd week of Jan 2012 at the steps.

Being at the courthouse steps gives you an idea of where the housing market is likely headed in the next 4-6 months. Foreclosure sales drying up means less inventory in the coming months. Less inventory means higher prices. It's the law of supply and demand.

Now, there's practically no foreclosures and no short sales. Inventory is less than 1 month. What do you think home prices will do this year? If I have to guess, I'd say there's a good probability that we will see higher prices in 2014. Of course, don't place your bet based on an opinion of a stranger on the internet. Hope I didn't yap too much. Time out.