Price at auction too high?

Question

Hi BP community,

I've been tracking a property in my mom's neighborhood that would be an ok rental, but much better as a flip. The property has been sat vacant for 3-4 years. I found out it went into pre-foreclosure a couple months back.

I made an effort to get in contact with the owner but - no reply. Found the it was held with US Bank, called them they said it was transferred to Ocwen Loan, callled them they said it was sent to Altisource, called them and they told me it will be up for auction in a couple of day.

Here my problem: Altisource said the opening bid for the property will be $284K. The max ARV of the street is $295K. Should I just walk away from the property, I mean the opening bid is way way too high. Running comps, knowing that not only has it been vacant for 3-4 years, and that the inside was trashed by previous tenants. I would not offer above $160K. I wouldn't even expect a regular buyer to even offer above $235K

Additionally I've never dealt with auctions. This would only be my 3rd property.

Any advice?

Account Closed · Answer

just because the opening bid is high, if there are no takers, that means the house is still available, find the owner, it may not yet be foreclosured, talk to the trustee, make your offer after a no sale auction

Account Closed · Answer

We've purchased several properties from the foreclosure auction over the past couple of years and we can't seem to understand how they determine the opening bid. Sometimes it's well below ARV and other times higher -- it really seems like there is no rhyme or reason (at least from our perspective) how they determine the minimums. If the numbers don't make sense, let it go. It'll likely end up on the auction block again or the MLS ...

Chris Lynch · Answer

@William HochstedlerI do know why it didn't tag you the first time.

Matthew Fields · Answer

Some banks just decide to bid total debt to take back and then get what they can on mls. They have just decided that's their way to get the most money. Others bid on their break even point, the number they think they could sell on mls minus all their expected losses and repairs they would do until it sold. This is, in my area what we usually get, but it seems usually govt owned mortgages are leaning toward acquiring the property and just selling through the their contracted sites or companies. In my area most foreclosure auctions average at about 80% ARV. with the occasional "Wtf"

Chris Lynch · Answer

Chris Lynch · Answer

@williamhochstedler I think you're correct, I put this post in the REO page because the department of Altisource I called was the REO. Public deed and tax still list the original owner, state (ma) financial statement list the owner as preforclosed in Nov 15.Sorry if I seem confused, i am, still very very new and learning, all I know is: yes current numbers do not work, but I will continue to stalk this house; anything under 200k is great (some room for ok profit), but I would black market some of my organs to get it near the 160K mark or less.

William Hochstedler · Answer

I think there is some confusion here. @Chris LynchI assume you are talking about a foreclosure auction here, correct (courthouse steps and all of that)?If that's the case this is the method in which the bank will legally retake ownership of the property to liquidate their collateral. So if it goes to auction and no third party bids at or above the opening bid amount, the bank will gain power of sale. It will be listed by an agent and be available on your MLS in a few weeks or months.Usually banks open with what is called a total debt bid. This means that if a third party purchases at this price, the lender-investor will be made whole. Occasionally we see banks lower this amount and take their write off up front. So these amounts are roughly based on the amount borrowed and interest accrued from non-payments. For example, if they owed $1500 in interest per month on this loan and didn't pay in 3 years, you can see how this amount could get upside down quickly.In any case, if the numbers don't make sense at auction, wait until it's listed as an REO and make your offer then.Good luck.

Chris Lynch · Answer

Thank you for the advice. I had heard some auctions open high because people have defaulted way early in their morgage. I will watch it and see what goes, I'd rather get it from an auction than a preforeclosure, I know they can carry some legal troubles.Silver lining, on the same street are two fresh divorces, identical houses, one house kicked her husband out and she then had an affair with next door's husband. Potential pair of house and motivated sellers.

Lydia B. · Answer

Let it go. They're starting off at more than what you shoulda offer, you're going to take a loss