Bidders for real estate properties at the Contra Costa trustee auction sales have been finding properties with deep discounts, especially in the
California real estate market over the last couple of years. Bidders have been buying for as little as one penny over the opening bid. Properties
that are priced well below market will however get bid up in a feeding frenzy.
I only purchase foreclosure properties at trustee auctions.
1) Owner has no rights to ownership after the sale.
2) Closing costs are just the doc tax, and auction commission.
3) All past liens are wiped out.
4) Ownership is transferred from the trustee in about 10 working days to the new owner.
Sales in Contra Costa County are held at the Court House Steps entrance each weekday twice per day, Several investors usually do their “Homework” and the bidding can be lively. Last Monday at the 9am sale we bought three properties for clients with nice discounts to the market, my cash investors were extremely excited about starting the process to get the new homes purchased rented or flipped.
Not everyone who attends auctions were there to make a purchase – but most investors do buy. My office supplies all the current information on the property especially property tax delinquencies, all older liens must have recons , judgments are usually wiped out as well as HOA liens still the lender better drop the opening bid offered by the trustee’s representative to make sure it gets sold to a cash investor.
Don’t be looking for any public notice of the discount at the trustee auction. Their not talked about that is why I have to professional buyer’s at the trustee auction listening to every cry. Updating the final bid amount is necessary by being at every single trustee auction handled every day.
Lenders our making their own troubles with out discounting, they end up absorbing the property with the management costs and taxes as well insurance and any vandalism. Lenders routinely end up with the property out of pure stubbornness in not discounting the amount owed. If the property is sold at the trustee’s sale to a third party, the foreclosing lender saves a ton expenses like
a) not pay the deed recording fee and documentary transfer tax,
b) not have to keep property taxes current,
c) repair the property,
d) absorb the potential costs of contamination rehabilitation,
e) be responsible for clean up and eviction (if necessary),
f) advertise the property for sale until the property is sold
g) maintain the property until sold, and
h) pay escrow and commission fees.
Also, holding non-performing assets in inventory until the property is sold limits the lender’s capacity to loan productive money to those who would borrow money from that lender and pay interest on that money.
Some institutional lenders estimate the total cost for property acquisition of a single family residence at the trustee’s sale to be in the range of $45,000 to $65,000 pending upon many of the above and related factors. So some lenders do lower the opening bid – but usually the day before or just prior to the trustee’s sale.
It seems obvious to me that a number of the lenders holding toxic loans in Contra Costa County (and several other California counties) are slowly opening the floodgate a little at a time through lowered opening bids at the local trustee auctions. I presume that such lenders watch the release of a number of properties at the trustees’ sales with discounted opening bids so that local neighborhoods are not suddenly hammered with discounted trustee sale properties in volume - seriously flooding the local market and depressing the prices of properties.
Apparently, Contra Costa County and several other California county lenders have somehow touched the right level of opening bids discounted to third parties Investors will take the risks if they feel the discount is there even in an uncertain market.
Then, why isn’t this same procedure apparently working in all counties, where no one shows up to bid? I talked to a number of agents, brokers, one direct answer. So, let me give you an educated guess – and it is only a guess.
The lenders apparently have become convinced that substantial discounts to opening bids at the trustees’ sales in some areas that would devastate the local real estate market and add substantially to their reportable losses. Irreparable harm could be done to the banks image in the local market and could result in substantial depression of the local residential real estate market in that area. Possibly, it is equally important to the Bank’s’ evaluation of the local market that they perceive an early resurrection of the California real estate economy and are just waiting to take further action later.
