Bidding on auction.com occupied property

[Steve E.]

Hello all,
I am watching this property and the status is occupied, the listing says do not disturb the tenant. Also no title insurance is offered at closing. It is a reo but then I did a title search by the last owner and it came out clear. The house had been foreclosed in 2009 and I drove by it and verified people are still living in it. After foreclosure how come the bank did not evict for such a long time. The comps shows this property at around $320K and the bidding started at $99K and currently at $154K. The reserve has not been reached. I have couple of buyers in mind I can wholesale this.
What do you all think? I am pretty new to auctions and foreclosures. I am worried about the condition of the property and what will it take to evict the current occupants? With these unknowns how much max should I bid?
Thanks

[Jack Bobeck]

Steve,

I purchased a property, close 10/4 on a property from Auction.com, yeah, they said the property was tenant occupied, but the previous tenants had vacated, but they did leave all their lovely STUFF. Evictions cost money, Foreclosures cost money. Banks hope if they send enough threats, people vacate on their own.

When my auction started, they had some ridiculous value of $144k and the "bank" bought it on the courthouse steps for $100 over what I offered. They accepted my offer. Know what things are valued and it can be a great site. Probably should do a quite close with a title company near you, so you can get a title search and insurance done, since Auction.com does not offer title insurance. It is cheap and a great benefit down the road.

If you have to evict, perhaps offer them 50 bucks for moving expenses and offer to not have this on their credit history as a judgement which will remain a long time for future rentals. Get some temps from a labor pool and clean up the property, and then get it on the wholesale market. You will get the deal done!

Jack

[Account Closed]

No disrespect intended, but ignore what Jack wrote. He should of done a personal property eviction if anything had actual value and whatever a bank pays at the courthouse steps is pretty much meaningless after it is an REO.

The reason banks sell a property occupied is because of a law passed in 2009 that covers i think up to the end of 2014. Though I'm not a lawyer or well versed in all the details, the law talks about that tenants can't be evicted from a federally insured loan that foreclosed unless the new owners are going to occupy the home or if there is no physical lease in place. Typically, whatever lease if it is at "market value" has to be upheld for a year (typically the length of the lease which should be less than a yr left on it).

So with the above said, if someone is in the house, and they can't make a cash for keys deal stick, they simply rent the house to the tenants. Apparently, auction.com worked out a deal to tap this inventory in hopes of turning over some of it.

With the comps showing the property at 320k and the current bidding at 150k, i'd be more worried about what the RESERVE is. I typically see auction.com stuff going no less than 70% of a previously listed value. Add in the auction.com fee and it makes the numbers a little tight for my likes.

As for dealing with the tenants. Keep in mind they haven't done anything wrong and usually are still paying rent to someone (typically the bank). I'd talk to them if the bid looks like it is going to be accepted. Either figure out a cash for keys, or a rental price/terms that make sense for everyone and move forward as best you can. As an investor looking to rent a house, they would seem like assets to me.

As for paying them 50 bucks to leave...good luck with that, i've dealt with maybe 40 cash for keys situations last year and nobody left for under a grand plus a few weeks of free rent. Except one guy, he left after his girlfriend answered the door and I later that day figured out he was married. He left that weekend.

[Franklin Romine]

I've bought three occupied properties through auction.com. Two of them required $500 cash for keys and a signed note that anything left behind belongs to me. Make sure the purchase price factors in these expenses and other unknowns. just because people are living in the property doesnt mean the property is anywhere near liveable.

[Steve E.]

Jack Bobeck, thanks for the prompt reply and appreciate it. Good luck with your close tomorrow.

Aaron Churnick, thanks for the detailed explanation and really appreciate it. I never knew about the law so thanks for pointing that out. I never realized banks can rent out the property. I thought the original owner is still living in the house. I do not mind holding the property if it generates rent for a year or so. My only concern is the condition of the property.

On the website it says do not disturb the occupants and also auction.com made me accept the agreement not to disturb the tenants. The auction is ending on Friday, so should I take a chance and knock on the door?

Frank Romine, thanks for the reply and the unknowns is what bothers me. Should I take a chance and go 'disturb' the tenants. I do not want to lie to them who I am if they are my potential tenants if I have to hold for a while.

On the page it says "IT IS A CRIMINAL OFFENSE TO TRESPASS ON THIS PROPERTY"

What should I do?

[Account Closed]

If you get the winning bid, before you sign docs. Park outside and turn your car alarm on. He will come out at some point?

Apparently, it may be possible that in the past I might of been in a situation where it could of been in interpreted that I was trespassing. Hypothetically of course.

I Don't know how to buy something without seeing the inside. Less it's like, 10 cents on the dollar. I'll put a deposit blind, but i won't close blind. Period.

[Steve E.]

Originally posted by Aaron Churnick:
If you get the winning bid, before you sign docs. Park outside and turn your car alarm on. He will come out at some point?

Apparently, it may be possible that in the past I might of been in a situation where it could of been in interpreted that I was trespassing. Hypothetically of course.

I Don't know how to buy something without seeing the inside. Less it's like, 10 cents on the dollar. I'll put a deposit blind, but i won't close blind. Period.

Aaron Churnick, thanks for the idea but I really don't want to miss on this. Let us see if anybody else have any other ideas.

[Rob K.]

I've purchased from Auction.com before, but not with an occupant. They keep sending me emails and magazines about their auctions.

What I don't like is that they want to give you a quit claim deed. With all of the robo signing that went on, I would be scared to have such a flimsy deed. Add on the fact that you are buying sight unseen and now have to deal with a potentially crazy/violent/sue happy occupant.

How are you supposed to protect your interests?

[Eddie P.]

Originally posted by Rob K:
I've purchased from Auction.com before, but not with an occupant. They keep sending me emails and magazines about their auctions.

What I don't like is that they want to give you a quit claim deed. With all of the robo signing that went on, I would be scared to have such a flimsy deed. Add on the fact that you are buying sight unseen and now have to deal with a potentially crazy/violent/sue happy occupant.

How are you supposed to protect your interests?

Exactly what I was thinking. I've been watching the same auction for properties here in Fl. I can't get past the transfer by Quit Claim deal. I guess you could run title searches prior but it gets pricey. I also wonder why they are even auctioning in this matter, in my market it REO typically get multiple cash offers above asking within hours of listing. Why not go the traditional route?

There is a reason those are occupied, not sure why. Maybe robosign, lost documents, improper service, title issues, etc....

Good Luck

[Wayne Brooks]

Eddie,
If you're looking at some of the same "first look" auctions I looked at, the reason they're occupied is that the foreclosure auction hasn't even occurred on some of them yet. I checked a couple, and the foreclosure auction date, was a week or two before the Auction.com auction.

[Steve E.]

Rob K and Eddie P., thanks for your comments. I am thinking exactly the same thing, this property is in a prime neighborhood. If they listed, it will be gone in matter of days. There has to be a reason and I am glad I posted here. I will decide by tomorrow.

Wayne Brooks, this property had been foreclosed couple of years back.

[Jack Bobeck]

Steve,

I am doing a quiet close at my title office here in Jacksonville, FL tomorrow, so no big deal. I will get my title insurance and title search done with my title people. So don't be scared off on the wimpy specialty warranty deed they offer. If the deal is good enough.....

My experience with every Auction.com auction is that every property in my area is occupied, which is complete and utter horse hockey. Most people in properties can be approached and you can ask questions. After all they have been barraged by people who want to list their home, help them with their credit or other solicitations. How many actually show up, without a badge and a gun.

Sometimes Kindness works, Aaron must not have any in his area. Works just fine here in Jacksonville, FL. It is a business, treat it as such, if people won't leave, evict and spend the 300-400 bucks, it is here in Jax, but most people without 2 nickels to rub together would take 50 bucks to move....

Jack

[Eddie P.]

@Wayne , I am looking at the auction.com occupied auction list for Florida. Just for curiosity, I picked 3 of them in miami dade at random and crossed referenced them on the clerk of courts site. 1 was still in the owners name, so it might of just transferred, 1 had foreclosed Jan 2011 and no writ of possession was ever filed. 1 was foreclosed 8/2011 and had a writ that had been issued and rejected with the comment "3rd party entitled to stay". The last 2 are well past the year if they were tenant occupied and the "act" applied to them.

Maybe I am being overly cautious, but it doesn't make sense.

Also, cash for keys do not work here unless you offer 1,000's. Last one I did was $3000 and I was lucky to get away that cheap.

[Wayne Brooks]

Steve,
I wouldn't hesitate to knock on the door, see what the tenants hope to do, what lease they claim they, etc. You will NOT be charged with trespassing.

[Steve E.]

Jack Bobeck,

Good luck on you close. The property I am watching is offering quit claim deed not warranty deed. If they had offered warranty deed it would have been better. Good for you and here is an article about the difference which I stole from an article here. http://www.bankrate.com/brm/news/mortgages/20040826a1.asp

Wayne Brooks, thanks for the encouragement and will do tomorrow.

[Steve E.]

Unbelievable, I just checked the property and four of the properties in the area just got bid $10,000 more and have the auction extended by 2 more days. All of them, am I being paranoid to think auction.com themselves raised the bid to cause a sense of demand. The reason is all the four properties had been sitting at the same price since last Saturday and within matter of 30 minutes, all of them have a new bid and extended. Hmmmm

[Eddie P.]

I noticed that as well on the ones I'm watching. Even the rare "reserve met" got extended!

[Steve E.]

Thanks Eddie P. for confirming :)

[Jack Bobeck]

I lost the first go-round with my property, someone outbid me, only to see the property come back on the market. SW4, if you miss this one, there will be another soon. Sometimes buyers cannot raise the cash in the 24hour window that auction.com demands.

[Steve E.]

Jack Bobeck, thanks for the info, will keep posted of my decision.

[Franklin Romine]

Steve E,

I learned a valuable lesson that you should definitely do not disturb the occupant. After the winning bid I was anxious to get the tenant out prior to escrow to give me a quick turn around in the repairs and re-rent. I wired the funds late on a Friday with the recording happening the next Tuesday morning. I woke up feeling good on Saturday, typed up a I'm the owner move out of my property letter and visited the occupant. Presented the letter and the occupant, which was a women tenant standing with a couple children said "well now I'm confused the bank is evicting us and we have a hearing on Monday", her attorney called me later that day and said I trespassed and they he will be postponing the hearing for 30 days. Impatience was going to set me back potentially at least another 30+ days. Tuesday after the recording I visited the tenant again with a $100 gift card to a local grocery store and told her if she moved out in 7 days I will deliver her $500. She agreed, we cleaned up the property and it rented quickly.

Moral of the story is who knows what's going on with occupant, assume nothing and do not jump the gun.

Frank

[Steve E.]

Frank Romine, thanks for sharing your experience but if I were you, I know we will be anxious to evict the tenant but I would have approached it like Jack Bobeck and defintely imagined how would it be from the tenants perspective and have first explored their situation before.

Any way this evening I visited the property and rang the bell. I saw a 7 year old through the windows but nobody opened the front door except their dog started barking. Waited for like 10 minutes and left.

All,

What are the drawbacks of the quit claim deed and if I have verified the liens from the county records, what else should I be checking?
Thanks

[Rob K.]

My concern with a quit claim deed and no title insurance would be all the robo signing that went on a few years ago. 60 Minutes ran a story that featured a mortgage company that hired idiots for low pay to sign deeds and notorize them. It was all a big scam and people started sueing to claim that they still owned the property.

A quit claim deed just says that whatever interest the seller had now goes to you. I could sign a quit claim deed on that property and give my interest (none) to you. It means nothing.

A couple years ago, I purchased two properties from a bank with quit claim deeds. I had to look up what was owed (taxes, water, etc) and assume these costs. The houses were only $4K each. I was able to flip them to other investors and used quit claim deeds to sell them. One guy fixed the house up nicely and sold it. The other guy rented his out and still owns it and hasn't had any issues. Every time I see him, he mentions that 60 Minutes story and says the quit claim deed makes him nervous.

[Eddie P.]

Buying with a quit claim is similar to buying at the court house steps. You assume all liability and must do your due diligence and look for any issues which might affect title. Besides the obvious mortgage and creditor liens, I also check utility liens, building and code violations, IRS liens, and prior year taxes.

The interesting thing is the properties I checked, were all foreclosed on a year or more ago. Some are empty even though the auction says occupied.

Earlier this year I bought a property at the trustee sale for $170,000, I thought I had been thorough with my research. I sunk another 25k into it and listed it. The closing agent called me 2 weeks before closing and told me there was a superior lien outstanding for $200k from 5 years prior. I could barely breathe from the thought of this.

After a few sleepless nights of research it turned out to be an unrecorded satisfaction of lien from when the previous owner refinanced. It took 6 weeks to straighten this out since that bank had gone under, the bank that took them over had gone under and not even the FDIC knew who would need to record the satisfaction or who even held the file.

Eventually it was resolved, but I am very cautious and run title searches before paying the balance.

I am dealing with a purchase now where the underwriter will not issue a tittle policy because on a previous transfer of the property the notary, witness and the seller had the same, very uncommon, last name.

[Robert Steele]

Originally posted by Steve E.:

What are the drawbacks of the quit claim deed and if I have verified the liens from the county records, what else should I be checking?
Thanks

Seeing you are from Texas I would like to point out that Quit Claim deeds in Texas are worth about as much as toilet paper.

http://www.expertlaw.com/library/real_estate/Texas-deeds.html

I agree with Rob K - on the properties offering Quit Claim deeds it seems like the MERS/Robosigning scandal has occurred with them. The bank cannot prove they own the title so they are just selling it without warranty.

I would run, not walk, away from any of these "deals".

[Devon McLaren]

Auction.com is 20+ years old and the nation’s leading online real estate facilitating the sales of billions of properties per year. Auction.com works directly with financial institutions and their unique relationship make the auction sale the easiest and most straightforward real estate purchase a buyer can make. These occupied bank-owned homes are cash-only and represent a unique investment opportunity. The homes are in varying stages of eviction and a Quit Claim Deed will be issued.

[Ad copy removed]

Sincerely,

Peter Chevalier
Director of Customer Service at Auction.com.