Setting Auction Bid Price: Be greedy or take the easy win?

Question

Answer

I have always started my opening bids at a point that I was fairly certain it would sell 3p.keep these things in mind.1. no sales costs.. 2. you get a check and it cash's 3. no inspections no reps and warranties to condition or title 4. bird in the hand.5.. there is always another deal@Chad Urbshott one of my favorite plays I had was buying notes from a thrift here in Oregon 2 to 3 weeks before the sale.. they did not want OREO on the books and have to mark to market.. I got nice deals on them.. substitute trustee go to sale without changing the sale date.. I set the opening BID and 97% of the time I was getting a check from the foreclosure trustee within a few days post sale.. so in an out in 30 to 45 days with nice gains.. Then Ms Pickle ( that was her name) who was Manager for all of Oregon retired new guy comes in and he is not interested in selling me the notes anymore so that gravy train dried up. I would NEVER want to take the property back unless I bought the note with the specific purpose to do so.. I only buy them to get cashed out at the sale.. There by spinning the return COC into the 100 to 300% rule.

Answer

I agree with Chad Urbshott I want out as fast as possible. I just had a property that the lender had interior pics from a year ago that the house was in good condition and a realtor BPO of $80k. Well the homeowner decided not to fix a clogged drain and ended up with a swimming pool In his basement. Value now $30k. Insurance doesn’t cover stupidity unfortunately Thankfully I got the note on the cheap and didn’t lose my shirt but it’s like hitting on 14 in blackjack - sometimes you win and sometimes you lose Why not hire someone to deliver a pizza to the house and take a quick peek at the inside for you ?

Answer

Ah ok, think I follow now. So if they set the foreclosure bid at the full balance they would have probably ended up with an REO. And if they set the bid at less than the full balance, there would still be a chance that they end up with the REO (if no one else bid). So rather than deal with either of those scenarios, they just sold the note at a loss to you and moved on

Answer

Jay Hinrichs - I cringe as well but just remember after they buy five they are a guru and start their own training program This response is not about any of the above posters but about he overall number of “gurus” entering the space and having their own training program

Answer

@Jay Hinrichs what a great gig! You had a great connection, solved your sellers problem, and had enough margin where you could sell it at the sale. Brilliant! It's making a lot of sense for our Fund to do the same thing. Funny how your business model affects your perspective. Some noteholders never want to take the property back. Rehabbers that buy at trustee sales hope to buy what you want to get rid of and are excited to pick them up!

Answer

I’m a bit confused: are you figuring out what to bid as a buyer at auction or are you trying to figure out the minimum bid you’ll accept as the foreclosing note holder? I’m guessing the former.

Answer

If I can get a property to sell at auction, I'd take that all day long vs owning as an REO as the carrying costs eat up any profits very quickly. It's also about the velocity of capital, taking an REO will add a MIN of 3 months onto your holding period and that's a perfect world.

Answer

4) zillow comps are way off and even in decent condition you lose 10k+5) zillow comps are way off and it's destroyed you lose a lot

Answer

@Jay Hinrichs - so the thrift was selling you the notes to avoid the 3% chance it becomes an REO and they have to mark to market? That's amazing ha

Answer

@Chad Urbshott Were making a play like this from the other side. We bought an NPN in Chicago for $59k in February. We got the loan on track and have a FC date at the end of the month. We're selling the loan for $93k. As is, the property is worth $130-$140k. ARV could be as high as $160-$170k.If we held it, the best case scenario would be that it sold to a 3rd party at sale. We'd probably get the proceeds a month later when the sale confirms. Worst case, borrower files BK or forces an eviction and we'd be looking at liquidating in the spring time next year. In Cook County, there are basically no evictions once winter sets in.To us, much better to have the certainty of a solid win and pass on the upside potential to the next guy....