NpS (Pennsylvania)
Posts: 4,216
Posts: 4,216
Posted:
Wondering if anyone has experience with online real estate auctions on foreclosed properties. Please share. Safe? Unsafe?
Sikubali jukumu. Read all posts at your own risk.
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Online RE Auction
Started by NpS • 10 replies • 1438 views
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LarryB13 (Arizona)
Posts: 4,099
Posts: 4,099
Posted:
I looked into some of these when we were looking for a new home about five years ago. In the end, we purchased a foreclosed home through a licensed realtor in a fairly conventional deal. We had the opportunity to negotiate a few terms, do an inspection, and arrange for our own financing at rates favorable to us.
In my mind there are two distinct types of auction websites: The kind where all they sell is real estate and other auction sites like eBay.
What I found with the dedicated auction sites was a lot of terms and conditions that were not favorable to the buyer. For example, the buyer gets stuck with paying a hefty commission to the auctioneer. In traditional sales, the realtor is paid by the seller. Depending on a lot of variables, there may be little to no opportunity to inspect the home before the auction. If you have to finance your purchase, you may have to use the seller's lender because a traditional mortgage lender won't work on the auctioneer's time table even if you were pre-approved.
eBay is a place to be especially cautious. I have found quite a number of shady sellers, including a guy who was bidding on his own auctions under a number of different ID's. When I brought this to the attention of eBay they did nothing.
Real estate laws exist to protect consumers but when you start buying and selling outside those protected boundaries you become a sitting duck. My advice is to stick with buying through a licensed realtor.
In my mind there are two distinct types of auction websites: The kind where all they sell is real estate and other auction sites like eBay.
What I found with the dedicated auction sites was a lot of terms and conditions that were not favorable to the buyer. For example, the buyer gets stuck with paying a hefty commission to the auctioneer. In traditional sales, the realtor is paid by the seller. Depending on a lot of variables, there may be little to no opportunity to inspect the home before the auction. If you have to finance your purchase, you may have to use the seller's lender because a traditional mortgage lender won't work on the auctioneer's time table even if you were pre-approved.
eBay is a place to be especially cautious. I have found quite a number of shady sellers, including a guy who was bidding on his own auctions under a number of different ID's. When I brought this to the attention of eBay they did nothing.
Real estate laws exist to protect consumers but when you start buying and selling outside those protected boundaries you become a sitting duck. My advice is to stick with buying through a licensed realtor.
NpS (Pennsylvania)
Posts: 4,216
Posts: 4,216
Posted:
Thanks Larry.
I'm particularly interested in how the terms and conditions on these auction RE sales are different than ordinary sales.
For example, PA has a standardized sales agreement that's put out by the PA Association of Realtors. I'm wondering how different those auction contracts are.
Hadn't thought about ebay. Can understand your frustration when the seller is also bidding to drive prices up.
But can you trust that there is a bid from a real buyer on the RE only auction sites?
My other concern is where sales are "as is". How does that affect an HOA? With ordinary sales, obligations to HOA get settled at closing. But if sale is "as is", maybe there's no settling up. I guess deficiencies would get passed on to buyers - Which would set things up for a dispute between buyer and HOA. Do you think this is a potential problem?
I'm particularly interested in how the terms and conditions on these auction RE sales are different than ordinary sales.
For example, PA has a standardized sales agreement that's put out by the PA Association of Realtors. I'm wondering how different those auction contracts are.
Hadn't thought about ebay. Can understand your frustration when the seller is also bidding to drive prices up.
But can you trust that there is a bid from a real buyer on the RE only auction sites?
My other concern is where sales are "as is". How does that affect an HOA? With ordinary sales, obligations to HOA get settled at closing. But if sale is "as is", maybe there's no settling up. I guess deficiencies would get passed on to buyers - Which would set things up for a dispute between buyer and HOA. Do you think this is a potential problem?
Sikubali jukumu. Read all posts at your own risk.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I find the best option is to look in your local newspaper. They announce the date and times of the foreclosures. The actual auction happens on the courthouse steps. Practice may vary each locality. However, it's basically "Town crier" style on the court house steps. Sometimes the owner will be there to bid on their own property to get it back. Most of the time it's just a few auction hunters/investors picking up a bargain. Regardless it's free and best option. Keep in mind there are rights to redemption in many states. So you may have to wait a year to actually do anything with the property. It depends on the state law on that.
Former HOA President
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
The foreclosure announcements are in the Classified section under "LEGAL NOTICES". Each paper has a different policy where and when they print them. It's not always done daily. The upside of this is that you can actually go look at the property before the auction. The address is printed. That way you can get an idea of what the situation is and if it's worth the bidding price.
Former HOA President
DouglasK1 (Florida)
Posts: 2,046
Posts: 2,046
Posted:
In my county, foreclosure auctions are managed on-line by a 3rd party contractor that is hired by the county. I would assume the auctions themselves are safe, but there are certainly plenty of potential pitfalls. You can't inspect and you buy as-is. Some sour grapes owners really trash their places before getting evicted, so there could be expensive damage. You don't get a warranty deed (the seller does not guarantee clear title). Any obligations on the property (HOA dues, special assessments) still exist and become your responsibility (this may vary by locale, but is the case in Florida).
Escaped former treasurer and director of a self managed association.
NpS (Pennsylvania)
Posts: 4,216
Posts: 4,216
Posted:
Thanks Melissa and Douglas.
Should have explained things better. Not really concerned about government sponsored auctions. Those are well regulated events with plenty of oversight.
My concern is about RE that gets sold through private online auctions that take place some time after the foreclosure sale.
Don't want to mention names, bot there are a couple of companies that have a lot of homes listed for auction on their websites.
Should have explained things better. Not really concerned about government sponsored auctions. Those are well regulated events with plenty of oversight.
My concern is about RE that gets sold through private online auctions that take place some time after the foreclosure sale.
Don't want to mention names, bot there are a couple of companies that have a lot of homes listed for auction on their websites.
Sikubali jukumu. Read all posts at your own risk.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I will tell you a story that appeared a few years ago locally. A family found a house online here in the next town over. They purchased it online and moved here to move into the home. It turns out the house was NOT really "For sale" and basically had been condemned by the city. The floors were even missing in the home! The reporters later found out the home had been "sold" atleast 2 to 3 other times over. So I would never consider buying something online like that site unseen.
Another issue are those famous house flippers who come to your town to teach you their "methods". How you too can purchase foreclosed properties and turn them into profitable rental/sales. Of course there are some hitches they don't tell you. These foreclosures are not bank foreclosures. They are most likely HUD foreclosures. Which are a bit beyond bank. This is more along the lines of unpaid taxes type foreclosures. Many homes the banks foreclose on can later turn into these types if they aren't picked up. There are a different set of rules/laws. Which I am not familiar with.
That is something that would make sure to find out. What kind of foreclosures are these?
Another issue are those famous house flippers who come to your town to teach you their "methods". How you too can purchase foreclosed properties and turn them into profitable rental/sales. Of course there are some hitches they don't tell you. These foreclosures are not bank foreclosures. They are most likely HUD foreclosures. Which are a bit beyond bank. This is more along the lines of unpaid taxes type foreclosures. Many homes the banks foreclose on can later turn into these types if they aren't picked up. There are a different set of rules/laws. Which I am not familiar with.
That is something that would make sure to find out. What kind of foreclosures are these?
Former HOA President
LarryB13 (Arizona)
Posts: 4,099
Posts: 4,099
Posted:
Melissa brings up a point that I omitted: These are not truly foreclosure auctions. These are properties that may have been recently foreclosed and failed to attract any bids at the sale conducted by the foreclosure court.
In my area we had a number of auctions that were promoted online but the actual auction itself was a live event attended by real people. Like any auction, there may have been bidders who ran the prices up but never purchased anything and no one knows whether these are just idiots off the street or shill bidders working for the auctioneers.
Arizona was once the home of land fraud and that arose mostly from the sales of unimproved rural parcels. Over the years there have been numerous reforms and such sales now require a detailed disclosure of the condition of the property and must be handled through a licensed escrow/title-insurance agency. Those who sell on eBay are either unaware of these requirements or do not care. One seller told me he was immune from those statutes because he does not live in Arizona.
If you look at the terms of service on eBay you will find that their real estate auctions are not binding contracts; they are only an expression of interest. Sellers, on the other hand, treat their auctions as if they are binding contracts and threaten the unaware bidders with various acts of reprisal if they fail to meet the seller's self-imposed terms.
The RE-only auctions I saw a few years ago seemed to impose a lot of terms on the buyer that would not normally be there. The "buyer's premium," for example, is just another term for sales commission and that would normally be paid by the seller in a normal sale. But the thing that bothered me most was the rush to complete the transaction. In the standard RE sales contract, if the seller accepts my offer I have a period of time where I may inspect the property and withdraw my offer for any reason. I do not see that luxury in the online auctions.
If you wish to utilize FHA financing you are probably out of luck if you want to purchase through an online auction. FHA takes about 30 days to put the paperwork through and requires their inspection plus a termite inspection. Online sellers are not going to give you that much time to act.
The HOA delinquencies are something that never occurred to me. It sounds like a buyer could find a nasty surprise waiting for him.
For me, auctions are not the way to purchase real estate as there is too much potential for outright fraud and even an otherwise honest seller may impose terms and conditions that leave the buyers with overpriced broken-down houses subject to many different liens.
In my area we had a number of auctions that were promoted online but the actual auction itself was a live event attended by real people. Like any auction, there may have been bidders who ran the prices up but never purchased anything and no one knows whether these are just idiots off the street or shill bidders working for the auctioneers.
Arizona was once the home of land fraud and that arose mostly from the sales of unimproved rural parcels. Over the years there have been numerous reforms and such sales now require a detailed disclosure of the condition of the property and must be handled through a licensed escrow/title-insurance agency. Those who sell on eBay are either unaware of these requirements or do not care. One seller told me he was immune from those statutes because he does not live in Arizona.
If you look at the terms of service on eBay you will find that their real estate auctions are not binding contracts; they are only an expression of interest. Sellers, on the other hand, treat their auctions as if they are binding contracts and threaten the unaware bidders with various acts of reprisal if they fail to meet the seller's self-imposed terms.
The RE-only auctions I saw a few years ago seemed to impose a lot of terms on the buyer that would not normally be there. The "buyer's premium," for example, is just another term for sales commission and that would normally be paid by the seller in a normal sale. But the thing that bothered me most was the rush to complete the transaction. In the standard RE sales contract, if the seller accepts my offer I have a period of time where I may inspect the property and withdraw my offer for any reason. I do not see that luxury in the online auctions.
If you wish to utilize FHA financing you are probably out of luck if you want to purchase through an online auction. FHA takes about 30 days to put the paperwork through and requires their inspection plus a termite inspection. Online sellers are not going to give you that much time to act.
The HOA delinquencies are something that never occurred to me. It sounds like a buyer could find a nasty surprise waiting for him.
For me, auctions are not the way to purchase real estate as there is too much potential for outright fraud and even an otherwise honest seller may impose terms and conditions that leave the buyers with overpriced broken-down houses subject to many different liens.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I will add that my step-brother bought a house at a foreclosure auction recently. He can't even touch the property for a year. It's sitting empty. However, it could also be housing people in some cases. Like others on here have said their HOA have leased out their foreclosed property. That means eviction processes and possible lawsuits.
HOA foreclosures are complicated. It's not always where your paying what the owner owes plus bidding price. Your also having to pick up what may be owed on the mortgage. Our foreclosure had a 2nd mortgage that had to be paid off. Which can be more or less what the house is worth after all the damage repairs.
I am not buying foreclosed property. My house was a foreclosure someone bought before me. They fixed up about 90% of it. It's taken me several years to fix it up. New windows, siding, fencing, flooring, paint, and electrical system... I will probably break even if I were to sale it but make better money renting. Which past experience in renting, isn't something I would want to do again. Unless you get the perfect tenant, it's a non-stop fix a thon...
HOA foreclosures are complicated. It's not always where your paying what the owner owes plus bidding price. Your also having to pick up what may be owed on the mortgage. Our foreclosure had a 2nd mortgage that had to be paid off. Which can be more or less what the house is worth after all the damage repairs.
I am not buying foreclosed property. My house was a foreclosure someone bought before me. They fixed up about 90% of it. It's taken me several years to fix it up. New windows, siding, fencing, flooring, paint, and electrical system... I will probably break even if I were to sale it but make better money renting. Which past experience in renting, isn't something I would want to do again. Unless you get the perfect tenant, it's a non-stop fix a thon...
Former HOA President
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
Meant to say not against buying a foreclosure...
Former HOA President
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