I used to study the whole foreclosure procedure, because I wanted to get the deals (you the know the drill, by a house low, fix it up and sell it for market value). As I delved deeper into this situation I found that the whole foreclosure situation is very legalistic and messy.

You know if you purchase a home during the auction (in many states) you must have the entire amount or the entire amount within 45 days to continue the auction right? They will not allow you to do a regular mortgage or anything.

There is alot of information in the library about foreclosure . . . but you must focus on your state . . . and most importantly YOUR COUNTY's rules and regulations dealing with these types of properties.

Mary,

There are a lot of questions in your post. I'll try to explain...

With your first example, that was a probate auction. That just means that the Executor was liquidating estate assets. It could be to pay creditors...or, it could just be to divide between heirs. It was a seller's auction though & they could set any minimum price they wanted as well as the terms of the sale. If they didn't get a bid high enough to satisfy them then they will just list the property & go for a traditional sale.

The auctions you're seeing that as you put it...were "bought" by mortgage companies are foreclosure auctions. Every mortgagee behaves different when foreclosing. Also, every state's laws are different. For example, in CT & NH auctions are conducted physically at the property. But, in Maryland & NY auctions are held on the Courthouse steps.

How do mortgagees behave different? Well, one may set a minimum bid based on the full appraisal. Another may use a percentage of the appraised value. And, still others may use the appraisal as a guide but use some other formula for arriving at their minimum bid. Then, some lenders just add up whatever is owed & use that number. There is no "one-size fits all".

If the property does not meet the minimum bid the lender will take a deed into their name & re-market the property. In some cases they will try to establish a deficiency judgment. But, not all states allow deficiencies...CA, for instance, does not.

Yes, a foreclosure auction will have an attorney involved. Whether the attorney represents the State or the mortgagee varies by state.

I have no idea why you would think there should be more country than city properties? Stuff happens in town same as in the country...

If there's a property you are interested in & have attended the auction but were out bid by a mortgagee...immediately after the auction simply go up to the representative & say, "I'd like to purchase this property. I will pay $xxx." That's normal & expected negotiating procedure at real estate auctions. Sometimes it works, sometimes it doesn't because every mortgagee has a different adgenda.

Mary, I'd like to address a common misconception about foreclosure auctions. In spite of the "Get Rich Quick" books on the market, foreclosures are meant to be "commercially reasonable" (that's a legal term!). They are not necessarily the buy of a lifetime. Sometimes, there will be an "absolute auction". This means that there is NO MINIMUM BID ESTABLISHED & THE PROPERTY COULD SELL IN THEORY FOR $1. Foreclosures are usually designed for a lender to sell the property at its outstanding mortgage amount or enable the mortgagee to take title & put the property back on the market. The mortgagee wants to get as much money as possible from the property to clear its debt. The foreclosure auction process is NOT DESIGNED TO PROVIDE POTENTIAL BUYERS WITH THAT STEAL OF A PRICE. However, if you are interested in purchasing a piece of property for what is fair market value then auction is a very viable way to go. The auction process brings together willing buyers & a willing seller.

If the mortgage amount is low you can, sometimes, get a very good buy at a foreclosure because the mortgagee will only bid in the amount they are owed. However, some states require the mortgagee to bid in the property at a "fair market" value somewhere between 70-80% of current appraisal (less than 6 months old, generally).

So, again...every state is different. Keep attending more auctions & talk to people. You'll get the hang of it...

You should have your financing lined up before bidding because, depending on state, you have to close somewhere between 30-60 days after the auction. Also, most auctions require certified funds to get a bidding number. Most mortgagees place that amount at 10% of the current appraisal. (I've yet to see ANY auction "subject to financing!) You can use the amount required as deposit to get an idea of what the current appraisal.

You do take a risk when purchasing at auction because you have no inherent right to inspect the property prior to the auction. Sometimes, the seller MAY allow access for a couple hours pre-auction but usually not.

Did I answer any of your questions or just confuse you more?

/Tricia

Mary, of course you can get a mortgage...but you must be pre-approved for "X" amount prior to the sale so all the lender has to do is plug in the property & get ready to close within the short time frame.

Your new mortgage, of course, provides the "cash" to the foreclosing mortgagee.

/t

That was all very helpful - here are some questions your response raised.

the lender will take a deed into their name & re-market the
property.

How do they usually re-market? The MLS? Some other way? Can you in this case call the company listed on the sale sheet?

I have no idea why you would think there should be more
country than city properties? Stuff happens in town same as
in the country...

I guess I associate the Sheriff with county jurisdiction. Just seems weird to me that city X has a forclosure and its not handled at the City level, vs. the county.

The foreclosure auction process is NOT DESIGNED TO
PROVIDE POTENTIAL BUYERS WITH THAT STEAL OF A PRICE.

Oh well hey, I would love to get a good deal, wouldn't we all? LOL! Especially since all I've ever done is end up losing big on standard real estate transactions.
That said - how I started to look at these (there is another auction I just saw even though I'm not looking for auctions particularly) is simply because I'm looking for a certain type of place and there aren't many of them.
I'll also say that I'm (1) rather shocked at the prices here in this dying rust belt town in Ohio, land of foreclosures and (2) at the fact that in 3-4 months of seeing the same properties on the MLS almost no prices have gone down (in what I've been watching, I can't speak for all the subdivision properties).

You do take a risk when purchasing at auction because you have
no inherent right to inspect the property prior to the auction.

The risk and lack of inspection is what makes the no really good price seem like such a raw deal. "Not designed to give you a steal" well he** then they can just put in on the MLS and let it sit. If someone is going to incur risk, and have to write a check on the spot sight unseen - seems like you'd get something back for that - i.e. a lower price.
I don't think that's an unreasonable thought.

On this second auction they have some statements about the price - they seem to be alluding to something I'm not sure what. I checked county records and its appraised at 142,500, assessed at 49,880

Thanks for the info, - not sure I'd ever have the guts but I find it all really fascinating and I figure the more I know about everything, well it can't hurt?

Mary

Here is a link that might be useful: 2nd auction

Me again...

1.) How does a lender re-market? Listing with an agent who puts the property on the MLS, lender's work-out division (that's where I spent my career), in today's world lenders list their REOs on their websites.

2.) Historically in our country, real estate records were kept at the county level. Therefore, laws/statutes, etc. developed around this tradition.

3.) Sellers are being stubborn on prices. I'm seeing across the country. Those who have to sell will eventually lower though. The stubborness of seller only prolongs the agony not prevent it. :(

4.) There's NOT A LOT OF INCENTIVE FOR A PURCHASER TO BUY AT THE AUCTION. The mortgagee's job is to get title to the property & then get it sold. It's better for a buyer to approach the mortgagee right after the foreclosure sale.

5.) On the link...it's obviously a foreclosure. Note how all of the pictures are taken from a distance (public road probably) & there are no interior shots. Many jurisdictions assess at a rate significantly below market value. For instance, here in CT...we are assessed statewide at 70% of fair market value.

Did I miss any?? :)

Auctions are fun!

/t

When I checked the appraisal of the 2nd auction it looked like the daughter inherited it in August 2005 after her father died. He died here in Ohio, her address is listed as Mass. I suppose it could still be a foreclosure if she's in some sort of financial difficulty but I suspect that its just tiresome owning property out of state. Maybe it took this long to get through some sort of probate. I wonder if its been rented the past two years? Oh well, its hardly the perfect property location wise and with only 2 bedrooms 1 bath I still think its overpriced which makes the appraisal ridiculous. Its on a busy road too. I might go see it just for fun.

Prices - why do so many people who don't need to sell have their houses on the market to begin with? That's an eye opener to me.

Incentive - you can say that again. Good tip about buying after the fact.

Thanks triciae - you always come up with the goods!

There are all sorts of real estate auctions. I'm in Ohio and I have purchased property at auction.

First off, a Sheriff's Sale Auction isn't limited to real estate. It is a means to liquidate property the owner has lost the right to possess, usually it's a bank default and the lending instituion has pursued this route. In Ohio, the usual way of determining what the auction minimum will be is appraisal. Then the minimum bid is usually 2/3 for a sale to occur. Sometimes it goes waaaaaaaaaay higher. I paid more than 2/3 on a house to get it and it really peeved another party who was bidding against me and expected it to go at the minimum. I got a bank loan on it, but yes........we got pre-approved before we walked into the sale for the amount we were willing to top out at. If the 2/3 figure is less than what the lendor is owed, they usually "buy it back" to dispose of in a more lucrative manner. You can EXPECT a house to not go lower than what is owed against it. That's typical. In today's market, many people actually own barely more than a doorknob if they're in over their heads and have second mortages on top of that.

The first house I got at a Sheriff's sale I got at the minimum bid. The bank didn't do it's homework and had no agent there to "buy it back". Their loss/my gain. They tried to dunn me for the difference, but backed away immediately when I told them Good Luck. It was the same bank with whom I had the pre-approval and I think they were just happy somebody took the monkey off their back and they would continue to get principle and interest. LOL. BTW the first house was in the city and the last in the country.

Putting houses up for Estate Auctions is a big thing here, and often includes selling the personal property before the big event. There is usually a minumum bid the owners or heirs will accept. Sometimes it's just a notice in the paper and you go to the attorney's office with a sealed envelope to submit your bid. The mins in that case are usually published.

People who normally list through realtors are now getting in on the act, and I was actually approached by an auctioneer not too long ago to put some of my property up for sale like that. Those properties and most auction properties are sold "as is" so buyer beware! You should really know what you are doing. One group of people who use them to sell houses do so because they know an inspection woudln't fly, or they don't meet code. Caveat emptor!

Several attorneys whom I have consulted have also given me vague advise as to buying properties where the deed might not be clear due to the property being used as collateral but unknown to the principle lender. They come out of the woodwork.

There are also tax auctions and these are the ones where you can supposedly get them for pennies. LOLOL. There are a lot of properties listed in the newspapers with delinquent taxes, but I have yet to see any local ones coe up for auction because of it. They end up in forclosures and the taxes get paid out of the sales.

Then there are HUD houses and they go through an auction process. Realtors are usually involved in this.

Banks and lendors who foreclose and then take their houses back also often list through realtors. Most of the realtors I know personally aren't thrilled to handle them and if you go through a few, you'll understand why.

It can be a good way to get a house. Just know what you are getting into.

Calliope - your in Ohio?! I do hope you check back.
I moved here 2+ months ago. I spent most of my life in southern Michigan and consider the economic difficulties to be somewhat the same, but in my limited experience it seems like people want a lot more for their houses here which has been a surprise. Actually Omaha is a fairly booming city and prices here are higher than there which has really been surprising.
I clicked on your My Page and see you like bird watching - me too! Are you on the Ohio BW e-list?
Anyway - back to the auctions topic, you have added a lot more info and the plot certainly thickens!
Estate Auctions - two I have seen are on the MLS. So this is sort of two'fer marketing plan? I.e. I can buy this from the realtor or go to auction?
Is the price listed on the MLS usually the bottom price they'll accept at auction? So while you normally might be able to negotiate a lower price from an MLS price, the auction price is the lowest period?
And some are just in the paper?

You say tax auctions often end up in foreclosure - so these are are auctions listed in the paper where someone is trying to sell their house to pay taxes and avoid a foreclosure on their credit? So they are going to be foreclosed on and hire an auctioneer with a floor price of what they owe - which may be the full price they paid since they got a zero down payment. I can see how that doesn't work.

The whole as is thing - are there no situations where you can get in to see the house first?

On the one hand I can't see myself going this route. On the the other it'd be just my luck to have the one and only property that meets all my criteria )good bird habitat is one) be one of these someday.

If the bank gets a foreclosure - It seems like selling a house to get back all the money loaned on a zero downpayment loan is not going to happen realistically at an action. For example, someone buys a new house in a new subdivision, zero down, pays minimum payments for 2 years then defaults. Principle pay off is nil, there are still new houses going up all around but now this house is not new. Sure the new house prices may have gone up a little, maybe not with builder incentives.
How would they think their going to get all their loan back at an auction with the minimum set at basically what the house sold at two years previously? Seems unrealistic.
Who pays closing costs, title costs and all that? That could be worth 20,000 on a higher priced property.

"just know what your getting into"

Well from this here I know more than I did before but......seriously not enough! Seems hard to know, espeically if you can't see the house.

Hi Mary,

Tax Auctions:

When a property goes to tax sale varies again state by state. Usually, if taxes are 2-3 years delinquent most states are nearing this point. Taxes are a priority lien & there can be other probems such as redemption & passing clear title. Who conducts a tax sale? Again, it depends on the state. In these cases, it could be a city/town...or, it could also be the county. Redemption simply means in some states people have the right to redemm the property up to a set amount of time by paying the auction purchaser the back taxes plus interest. As a priority lien, any mortgages would be wiped out. So, in reality if there's a mortgage usually the mortgagee would pay the taxes, add the amount to the mortgagor's debt, & no auction would occur. Such an event would constitute a default & the lender would likely call the mortgagor's note due & payable. In practice, if the taxes are this delinquent usually they are also delinquent on mortgage payments.

Mary, about your question regarding the lender recovering their costs as per your above example...don't try to interject logic where there is none! Lenders are just simply trying to protect an asset on their books as long as possible regardless of true value or logic. Eventually, it all comes home to roost (ie Countrywide). So, as a potential purchaser...patience is often rewarded.

As to the purchasing "as is, where is" aspect of a real estate auction (or any other type of auction for that matter)...that's why it's best to approach the lender after the foreclosure sale. Then, they will allow you access & some time to perform due diligence.

Estate sales: I'm not sure of your exact questions but sometimes estate sales include the real estate & all contents (ie furnishings) with everything going on one gavel.

There are also Federal Tax Lien Sales. Here, the federal/state government attaches a lien to the property & can foreclose just like a real estate tax lien except they are NOT a priority lien. Therefore, the foreclosure is subject to any existing mortgages or other liens that have attached to the property prior to the federal lien. In this situation, the mortgagor can redemm the property for up to one year.

There are many situations that can cause a property to go into foreclosure besides delinquent payments. Even failure to carry insurance can, in some cases, be considered a covenant default & the note called.

/tricia

Tax auctions are those where the house is sold out from under the owner to pay real estate taxes. What I was tryng to say is you never see any come about because they usually end up in foreclosure before that ever happens and sold at Sheriffs sale for defaulting on mortgage loans.

"f the bank gets a foreclosure - It seems like selling a house to get back all the money loaned on a zero downpayment loan is not going to happen realistically at an action. For example, someone buys a new house in a new subdivision, zero down, pays minimum payments for 2 years then defaults. Principle pay off is nil, there are still new houses going up all around but now this house is not new. Sure the new house prices may have gone up a little, maybe not with builder incentives.
How would they think their going to get all their loan back at an auction with the minimum set at basically what the house sold at two years previously? Seems unrealistic."

Exactly! Marys1000. That's why credit is tightening finally, regardless of what's happening to prime. Forclosures are impacting the lending industry. Risky lending policies (especially by institutions other than the traditional bank) are what drove the prices for housing up so substantially in the recent past. Housing appreciated so quickly that in some areas property doubled in value just by sitting there doing nothing. So, in that economy, the lender had a better chance of getting their money back, just from the automatic equity caused by appeciation. People weren't afraid of buying homes with mortgages up to their teeth, because they expected it to appreciate wildly, and they could always sell it and tap the easy equity. The reality, is they often tapped the equity before they sell it however with loans and lost their equity anyway.

As far as I'm concerned, even though I presently have property I am listing for sale, the real estate market went nuts the last decade and it was a bubble destined to burst. It's gonna cause a lotta ouchies for people caught up in the process, but the reality check on real estate will be healthy for the market in the long term.

Yes, you can often see homes going up for auction. How easily depends on what kind of auction it is.

Ok, I was looking at the sherrif page again (I'm doing this on and off for the learning process and out of obsessive curiousity:) and saw an area/location I liked.

Called the attorney and ended up with a couple more questions. I'm trying to piece together what may be going on one because its like playing detective which is just plain fun and two because I have figure out things its good to know about.

So first

The assessed value is 180,000
the judgement is only 14,895.53

Ok this is the weirdest money difference I've seen. Usually the Judgement is a little less or a little more (in terms of thousands or 10's of thousands).

The attorney obviously wasn't going to give me specific info but when I said I was not a flipper or expert or anything she was nice and tried to inform me of how things work and some of the pitfalls....like

1) even though the taxes look up to date on the county website that doesn't mean they are - just that maybe the bank has been paying them.

2) That the Judgement listed on the auction page may not be all that's owed. That might be only what's owed to some priniciple lender and then there may be other money owed

So say the appraisal is 100,000 and it sells for 2/3, i.e. 75,000 which is what is owed to the principle lender. But there are still 10,000 in property taxes on top of that and a home equity line or some other sort of morgage or loan, say another 20,000 to another bank or individual - as in maybe a divorced spouse or family member.
Where does the additional 30,000 owned come from?
Is there any circumstance where the buyer has to pay?

++++The lawyer inferred that the buyer might have to pay all the back taxes that you don't know about because the bank has been paying them in addition to the auction price++++

Playing detective:
Apparently, Charles listed at Martin Dr in the legal paperwork, tried to refinance and Diane listed at Hedges address wouldn't sign. Then if I read the deed stuff right even though Diane also refused to sign the Quick Claim Deed they chopped it all over the Charles. I think. Under a name search he is listed at Hedges and only at that address. So I would think this was a divorce - this was November 2003.
The place looks run down to he** but the county website doesn't look like taxes are in arrears. The dirt was bought in 1976 by Pierce, the house put up in 1980.
So if I was a potential bidder - I would think.........

1)Original owner so shouldn't be any weird passing clear title issues? That seems to be a positive.

2) This guy can't be losing this place for 14,895. There's got to be some other loans in the woodwork somewhere - but without knowing that could cause a bidder problems?

3) Seems like this place hasn't been taken care of, maybe because he figured he'd lose it. That's a negative.
3 a) What's the likelihood he'd actively trash the place? I would have thought that Diane might have. But since that's his address he's got to be living there now so maybe he fixed anything truely detrimental?

It did finally dawn on me that I need to be looking at the past sales information to see if there's a property I like that was bought by a bank.
Not quite as much fun although might actually result in a property:0

Here is a link that might be useful: 1108 Hedges

I'll take a stab at answering some of your questions...

1.) Large difference between appraisal & judgment.

It might be a junior lien holder that is foreclosing. For example, the property is appraised at $180K; there's a first mortgage with $60K outstanding (hypothetical); and a second for $14,895.53. Many times, a homeowner in trouble will keep payments on their first mortgage current but default on the second. In our example above, there's enough equity for the junior lien holder to foreclosure, take title subject to the priority lien, & still anticipate selling the property for enough to clear their position.

2.) Yes, that's probably correct about the taxes. You should pay a visit to town hall & take a look at the land records. That will tell you who the mortgagee(s) is. It will also tell you if my above guess is accurate as to who is actually foreclosing. If it's a junior lien holder foreclosing they have probably paid the taxes. A junior lien holder does not want the priority lien holder to foreclose in a case like this because that foreclosure would wipe out their subordinant position.

3.) Other monies owed. Yes, undoubtedly there are additional charges against the borrower. These would include penalties, late fees, accrued interest, attorney fees, auctioneer fees, advertising fees, appraisal, insurance, real estate taxes, etc. A foreclosing lender will include all of the above into their auction bid.

4.) Also, if it is a subordinate lien holder who is foreclosing anybody bidding at the auction would be taking title SUBJECT TO PRIOR LIENS such as a first mortgage. So, let's say you were the successful bidder at $21K. You didn't buy the property for $21K...you purchased it for $21K plus the $60K I noted as hypothetical above for a total purchase price of $81K & you are responsible for paying the first mortgage. Now, that's a whole 'nother bucket of worms because there's probably no assumption clause in the mortgage...so the holder of the first might require you to get a new mortgage.

5.) Real estate taxes are ALWAYS A PRIORITY LIEN. So, they would have to be paid. In your example though there is no tax lien. Somebody has paid the taxes (likely the lender). The lender would have taken the taxes into consideration in their bidding strategy at auction. So, there would be no consequence to any successful bidder at the sale.

Any liens lower in priority than the foreclosing entity (other than real estate taxes, mechanic's liens) is distinguished in the foreclosure process. So, if Aunt Thelma is owed $10K...she loses.

6.) Your link only took me to the county page. I was unable to actually look at anything useful to your example. So, I can't comment on your "detective" work.

7.) NEVER assume there are no title problems. As example, maybe whoever built the house never paid the roofer & the roofer filed a Mechanic's Lien that has been sitting there all of this time. It's a priority lien. There's any number of title issues that could be a problem. Again, a trip to town hall will reveal title issues.

8.) Yes, he could be losing the property for $15K. I once foreclosed approximately $75K against a property appraised at $2.2M. (There were nesting bald eagles & my borrower couldn't sell the property because of the eagles.) I foreclosed & worked out a deal with the city to buy the property from the bank & establish a park around the nesting site. The city purchased the property for what I was owed plus cancellation of all of the back property taxes. Strange things happen.

I'm guessing it's a second lien holder that is foreclosing based on what the attorney told you.

9.) Has he trashed the place? Gosh, who knows!

10.) Buying an REO is easier than purchasing at foreclosure auction but not nearly as much fun nor as exciting as standing there with your bidder paddle, "Do I hear $50K? I've got 50...do I hear $55K? Yes, back there in the corner...come on now, it's a great house...now do I hear $60K?" lol

/tricia

It'd make good reality TV. Of course I've had enough of reality tv so maybe I ought to shut up.
Me with a paddle - that'd be a laugh.
These auctions are always when I'm at work. Not sure whether its worth vacation time but I might call if no one else buys it and it goes to some bank.

Well here's a couple of related questions.

Say this house goes to the junion lender, who is owned appros 15,000.
Then there is say 60,000 owned to a primary lender.
Total 75,000, no other liens.
Its appraised at 180,000 even though the house looks really uncared for.

How does a single bank decided what to sell for? Auction has to get 2/3 of the price by Ohio law. But a bank decides how?
What happens when 2 banks are involved? How do they decide price?
Do you enter into a negotiation with contingencies like with regular real estate? I..e. contingent on inspections?

Thanks,

Mary

Mary,

Only one lender forecloses. There is no 'joint foreclosure' between say a first & second mortgagee. The foreclosing mortgagee makes all of the decisions. If a junior lien holder is the foreclosing lender, that lender would take title subject to the first mortgage & have to pay it off should they be the successful bidder at the auction. If a first lien holder forecloses, any junior liens are distinguished by the foreclosure action.

The standard a lender has to meet at a foreclosure auction is known as "commercially reasonable". Apparently, in Ohio, that benchmark is 2/3 of the appraisal. In other states, it's 70% or 80% of appraised value.

After a property becomes REO, the bank will set a price based on a current appraisal. And, yes...you can make an offer contingent upon inspection, financing, another appraisal, etc.

/tricia