On Bid-Rigging and Buying Foreclosures on the Courthouse Steps

I can no longer say I'm a newbie real estate investor since I've passed the 3 year mark of since my original real estate education from the high priced seminar industries. 

Unfortunately this brings the passing of the innocence of the new real estate investor.  I see this with new graduates from seminars: the excitement of making money in real estate...the hope, the bright eyes, the optimism of the future as it's replaced with guarded concern and jaded opinions that experience brings.  I don't mean to sound negative, as I am very positive about real estate investing and the opportunities that exist.

I saw a news story about bid rigging at the courthouse steps for foreclosures - you can read it here.  But the reality is this happens all the time.

Early on I attended the foreclosures in Travis and Williamson Counties, the counties near where I live in Austin.  I even had my cashier's check ready to purchase a sweet foreclosure at a heavily discounted price.  I drove around town, viewed the properties and I was ready with my notes, my values and my "not to exceed" price.

I was ready.  I knew which property to bid on and the excitement started when the bidding started.  The bidding started.  I was up against this cowboy that seemed to know what he was doing.  I kept bidding and the next thing I knew the bidding was higher than the cashier's check I had with me.  I KNEW that bid amount was higher than it should be.  

These guys were kicking me out of the game.

So the conversation I had with this guy went like this:

Jean: "What does it take for me to get a foreclosure here?"

Cowboy: "You might try going someplace else."

Jean: "I guess I can go to Williamson County."

Cowboy: "No, we're in Williamson County too."

Jean: "What about Bastrop County?"

Cowboy: "Yes, you can go to Bastrop County, we aren't there."

Needless to say that was my last visit to the Travis County Courthouse for a foreclosure sale.

I network locally in Austin.  Another investor I know regularly attends the Williamson County foreclosure sales.  He spoke of a time that the bidding on a property got to the point that it was 2 main investors.  During the bidding, one bidder looked straight at the other bidder and their eyes connected.  You could tell a silent deal was made right then and there in a split second.  (The deal was to stop the bidding and do the deal together.)

So yes, my innocence has waned.  I've become jaded.  I'm delighted when I see people getting arrested for "bid rigging", but the reality is that it happens everywhere and I don't think it will ever stop.  In the mean time, I look for other ways to buy properties, find great spreads between foreclosure prices and retail prices, share what I learn on my field trips and help wherever I can.  

My advice to the newbie?  Stay away from the courthouse steps.