Buying at Auction in Phoenix, AZ

[Kevin Ferris]

A little background on me. Realtor (3yrs), home owner in North Phoenix. Bought REO property in Scottsdale Sept-2012. Lived in it for a couple of years, now renting it out. Moved into a new Taylor Morrison home in North Phoenix 18 months ago. I like the Phoenix market right now. A lot. So we're planning to buy a few rental properties and hold for a few years.

Currently working on buying a short sale in Phoenix, waiting for bank approval.

Looked at another short sale that has since been turned down by the bank, and is now going to auction.  Looking to possibly buy it at auction.  I'm trying to find info on the process.  Could someone please point me in the right direction?  Do I just go to the courthouse and start asking questions?

I've tried searching these forums without much luck.  Maybe I'm doing it wrong.  Coffee or lunch is on me if anyone knows the process and is willing to let me pick your brain.  Willing to trade detailed market info that I have access to as a Realtor for info on the foreclosure process. 

Thanks in advance for any info or direction!

[Sean OToole]

Hi Kevin,

Arizona is one of the better states for buying at trustee sale. A few key reasons: 1) they require the opening bid to be posted before the sale, 2) postponements are limited by statute (though definitely still happen), and 3) you only have to bring $10k, not the full amount when you buy, though the rest is due the next day. You'll lose the $10k if you get cold feet, but that is still a lot better then other states.

When buying at auction, there are a few key differences vs. a traditional sale: 1) you won't get title insurance, 2) no inspections, 3) can't get a traditional loan, though if you've got the $10k you might find a hard money lender that can get you the rest by the next day, 4) if anyone is in the home you'll have to evict them. For taking on these risks, you should expect some discount from "market" value. How much of a discount will depend on the property, who else wants, and where the bank opens the bidding at.

The item above that is most likely to get you in trouble is the "no title insurance", and this is where you'll want to focus most of your energy if you've already seen the house, and have the cash. When a loan is foreclosed on, it "wipes out" junior liens from encumbering the property, with some exceptions like the IRS's redemption period. However, you will still need to pay any senior liens, past due property taxes being the obvious one. So if you are bidding on a first mortgage, you really need to make sure it is truly the first, and you need to find the past due property tax amount. If you are bidding on a second, then you'll also want to find the balance of the first mortgage. That is a way too simple overview, but hopefully you get the idea. If you have a good title co relationship, they may be willing to help you with this.

I also personally think it is worth reading the state law before you bid for the first time. That will make you more knowledgable (in that aspect at least) then most. See: http://www.azleg.gov/ArizonaRevisedStatutes.asp?Ti... and scroll down to section 6.1 Deeds of Trust, and specifically 33-807 through 33-814 (not the mortgage / foreclosure section, mortgages are rarely used in AZ, even though most of us mistakenly call deeds of trust "mortgages").

Here is a summary of the process I wrote a while back: https://support.propertyradar.com/hc/en-us/article..., but note I haven't updated the statute excerpts there in a while so go to the link above instead to read the actual codes.

I purchased about 150 properties at trustee sale. It is personally my favorite way to buy distressed real estate, though I'm sure others feel differently. :-)