Went to an auction and found the the bank irrational

Foreclosures
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Went to an auction and found the the bank irrational

Enrique Ramirez
Wholesaler · Putnam, CT · Member since 2011 · 6 posts · 2 votes

I went to an house auction over the weekend and when I got there found out the asking price the bank has set was unreasonable high. The price was at 95k for a property value at 100k (Based on similar houses in the area).
The property had about $3k worth of unpaid taxes. And the inside needs major work.

Is the bank irrational? or they are smarter than I am?

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  • Nathan Emmert
    Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
    14y

    It seems many banks and even Freddie/Fannie set their starting prices based more on what was owed then true market value. Sometimes that creates great opportunities for investors as they sell below market... but often times it results in situations like yours. It takes time for reality to set in.

    0Reply
  • Jim S
    Real Estate Investor · Virginia, DC &, MD · Member since 2008 · 261 posts · 71 votes
    14y

    Yes....banks can be irrational.
    Might be based on what they are owed.
    Could be based on the premise that there is always a sucker in every crowd.

    0Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    14y

    Numerous possibilities. Banks advisor's evaluation could be wrong. Your evaluation could be wrong. Someone at bank could be playing politics. New zoning may be immenent. Don't bother figuring it out. Move to next deal!

    Private Mortgage Financing Partners, LLC
    WebsiteView Page
    0Reply
  • Enrique Ramirez
    OP
    Wholesaler · Putnam, CT · Member since 2011 · 6 posts · 2 votes
    14y

    Is there a way to find out ahead of time the opening bid is? I was talking to the representative of the committed and he said he got this information the day before.

    Don Konipol: You are right! Time to move on to the next deal.

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    14y

    On foreclosure sales I've attended (Texas), the bid price was a carefully guarded secret. Good luck. Rich

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    14y
    Originally posted by Enrique Ramirez:
    ...
    Is the bank irrational? or they are smarter than I am?

    Applying the word "rational" to a bank is not going to work - for just about anything that involves a bank and real estate.

    I'd say any investor who expects a bank to be rational about real estate is the party who is really irrational!

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    14y
    Originally posted by Enrique Ramirez:
    Is there a way to find out ahead of time the opening bid is? I was talking to the representative of the committed and he said he got this information the day before. ...

    There is a link in this next thread that discusses the max bids:
    http://www.biggerpockets.com/forums/41/topics/68977-foreclosure-auction-sheriff-sale-and-trustee-sale-faq

    0Reply
  • Don Chambers
    Investor · Warner Robins, GA · Member since 2011 · 83 posts · 15 votes
    14y

    In my area the banks seem to offer what is owed. If no one offers more it goes to the bank for the balance and then they can try to sale it on the market. I am not sure why they do this but I have given up going to the foreclosure sales.
    Instead, I look for bank owned properties and buy them from the bank after the sale. I have 15 hours and purchase 14 of them this way. They usually sell below the price at auction. For the last few months I have been blogging about this topic.

    0Reply
  • Stanley Crawford
    Real Estate Agent · Ivor, VA · Member since 2011 · 73 posts · 21 votes
    14y

    I know of a property near me that the bank wanted $180K which is what is was owed. 2 years and 4 auctions later my buddy bought it for $45K

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    14y

    Around here most opening bids are for the amount that's owed. In most of those, nobody bids and the bank takes it back. There's nothing irrational going on, its just the process. A small portion are started at reasonable values. Those are the ones that actually sell at the auction. I think those lower bids are for properties where the lender thinks they have a short at collecting a deficiency.

    The opening bids are published Monday afternoon by the public trustee (a county office.) Most counties have them online. Auctions are Wednesday morning, so you have almost 48 hours to do research. Denver county is one day later each week.

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