All Forum Posts by: Stephen Roberts

Regarding the reserve, there must be some rational structure behind it (not just personal choice by lender). Anyone else have a suggestion from your experience?  I believe they are obligated to accept my offer if I hit their reserve, so I believe I want to come close, but not go very far over.

Thanks for the thoughtful response Kevin,

And will they share that BPO (Broker's Price Opinion) in any way or is that kept behind the veil also?

Hi all,

I'm attempting to be as strategic as possible in establishing my target (not maximum) purchase price offer for a property.  I believe I want it to And I'm looking for whatever I can find to tease out how high the seller's reserve price is.  Any suggestions on how to clue in on the bank's reserve price would be welcome.  I know I won't find a hard rule and that it "depends" on many many variabes, but I'm looking for "clues".

CLUE 1) STARTING BID(YES?) In looking at multiple REO's currently under auction (at Auction.com) in the same zip code, they have respective starting minimum bids of $15k, $20k, $40k, and $60k. This is ~15% of appraised value (for the $15k, $20k, and $40k properties) and ~30% for the $60k property (which is ironically $100k lower appraised value and the 2nd most highly valued behind the $40k min bid property). So I'm wondering if they have a lower reserve for the first 3 (at 15%) than the 4th (at 30%) even though one of the first three has a higher appraised value.

CLUE 2) COMPS (YES?): Nearby comparables on $/gsf basis.  Yes, probably, but at what multiple since it's going to auction...  70% recovery factor, 80%, 90%?

CLUE 3) LIEN VALUE (NO?): Mortgage on which the bank foreclosed originally. Once the borrower defaults and the property goes REO, I'd expect the bank just writes-off the mortgage value and writes-in the current appraised market value (the delta is them truing up their financial position for stockholders). Certainly they aren't likely to get the full value all back if the property was so underwater that a shortsale path wasn't taken.

CLUE 4) AUCTION ROUND(YES?).  Do they drop the reserve ~10% for each Auction round that the reserve isn't met.  i.e. ~90% for the first attempt, ~80% for the second, etc.

CLUE 5) RULE OF THUMB (N0?). Is there a RoT used in the industry that roughly covers all of the above?

Any other suggestions or links to other forum threads?

Thanks,
Cole

thanks all for the welcome! Micki, I and my wife were raised in Albuquerque and love New Mexico.  Still have lots of family and friends there.  Please keep in touch.

@rick harmon, thanks! I agree more lead time would be good and save me some late nights.  They announced the auction on12 /17.  It seems odd to try to auction during the holidays and also give such short notice.  Regarding title insurance, I just discovered that auction.com has provided a title insurance commitment letter with exclusions.

@Guy Gimenez, thanks again!  Very clear.  Matt, thanks also!  Great context and I'm thinking I should now share this with the county representative I met (who had expressed such concern).

I've also found the prior mortgage docs and will be using them tomorrow to better understand the banks position.  Thanks again for resolving the subject of this thread.

Thanks all for taking the time on 12/24!  I wasn't sure I'd get even a single response.  

Chris, thanks.  I read through the posting you shared.  It gave some great context, but didn't help me answer the questions I don't think.  Sorry if I misunderstood.  I've searched again, but am a little overwhelmed by the results and they don't seem to address the specific issues below.

Guy, thanks.  We talked to the city and the residential use is conforming, but the parcel lot lines are not consistent with their records (I'm not sure if I was right to call it "non-conforming" under this situation).  They said the buildings are grandfathered in because they were built pre '73, but that we'd have to formally subdivide it to correct the parcel boundary discrepancy.  New Question#4) any insight into how much this subdivision would cost?  A few $k? Or if there's even any value (see discussion with Wayne below regarding legal description)

Guy, I'm glad you are confident about Q2 (bank has right to sell), which leads me to a new Q5) is it reasonable that such a correction to title transfer would take 7 months from date of foreclosure in May?  Seems so long.

Guy, I take your point about the title insurance.  There's actually a 3rd private party who owns the 4 parcels that are split in half (since the 1960's) by the property I'm interested in purchasing.  He may be another unknown encumbrance separate from the bank and property owner of record.  I'm not sure I can get title insurance by Monday as time is short.  Q6) If I'm the winning bidder, can I get title insurance after winning the bid but before signing the contract to purchase?  I realize that this may only be something a title co can answer.

Wayne, thanks.  The legal description on property shark (not sure of their source) actually says "N 1/2 OF LOTS 1 THRU 4 BLK 2 WESTSIDE ADDN. UNIT 2".  Q7) Does this suggest to you or the others that the property is legitimate even though the county shows it crossing multiple parcels and not having been subdivided (it's actually a large lot, so the 4 lots would have been divided and then re-aggregated to create the current parcel description)?  I'd prefer not to have to subdivide it without gaining the ability to build more units (ie I don't want to just pay to correct the docs at the county).

Through the magic of google, I've found a legal notice from May 2014 (7mths ago) showing that the recorded owner of the subject property is deceased and that the State auctioned the property to pay for associated fees and a $274k judgement won by a bank (Northstar) against the property owner and heirs (judgement seems high since the property has been appraised at normal condition by the state for $140k and I didn't think that Albuquerque saw the degree of price run up and corresponding crash circa 2008 seen in other parts of the country!?).

Northstar is the current bank owner auctioning the property through Auction.com, so Q8) am I right to assume that they bought it from themselves on the courthouse steps in order to take the property through a reserve auction and improve their chance of a higher sale price by setting a reserve minimum?

Thanks again for your generous support and any more you or others can provide on the new questions 4-8 above!

Hi everyone,

What an amazing community to stumble upon!  Blows me away to see such willingness to help and contribute to each other's success.  I found you all because I'm looking for help (just posted: http://www.biggerpockets.com/forums/16/topics/1641...). Any help greatly welcomed.

I'm interested in historic or unique property renewal in Albuquerque and the San Francisco Bay Area. I don't care to make a killer profit, but I don't want to take a killer loss either. I want to make the community I invest in better. And have fun. That's about it.

Experience

Had a RE license roughly 20yrs ago. Own house today.

Real Estate Goals

Reasonable profit and no deep losses
Fun
Contribute to better community

Currently Seeking

Insight and community

Hi everyone,

I'm new.  I searched the forums and haven't found a place where this has been discussed.  I'm considering putting an offer in on a house through Auction.com.  I've been doing a lot of homework to make sure I put in a good offer and limit my risk.  Yesterday, I hit on a big issue that I need to get a handle on before I can bid.  The auction closes Monday 12/29, so I only have a few days.  I've already reached out to a RE attorney and title company, but won't likely hear back until it's too late given the holiday.

Auction.com offers a Special Warranty Deed (not a GWD).  I understand the difference, and it sent me looking for more information on title.  I found that the building originally contstructed in 1964 actually sits across parts of 4 parcels that were never subdivided.  i.e. the property does not sit on an official parcel and have it's own address even though the address has been on the side of the building since 1964.  The County has the owner as a private individual living a block away (who I haven't contacted).  The Assessor's office shows that the bank has been paying property taxes and is the current owner (not the private party), but they're quick to say that they don't care who the owner is officially as long as the taxes are paid.  So now I'm questioning how the bank can legitimately sell the property that shows per platted parcel boundaries as being non-conforming AND under private ownership.  They've locked up the building, which suggests to me that they have some rights as I would simply cut the locks off if I was the private individual who owned the property a block away.

So my questions are:

1) clearly this puts a legal cloud over the property that diminishes its value.  Should I stay away or use this to my advantage?  And if the latter, how best should I take advantage of this situation?

2) how can a bank auction a property that has someone else shown on the county documents as the owner of record?

3) could I get title insurance for this issue?  I don't want to lose all my money if I'm the successful bidder.

Thanks for any help the members of this community can lend.  I'm hoping to get RE attorney feedback too, but am at a loss at this point.

The house is in Albuquerque, NM.