Buyers hoping for a deal will have to look high and low these days – because sellers are typically the most optimistic early in the selling season.
Maybe a bank-owned REO? Don’t get your hopes up, there have only been seven REOs listed in San Diego’s North County coastal region over the last six months.
How about a short-sale? There have been 38 listed in the same period, but with the lighter load these days, the servicers have been more diligent about selling for full value.
But I heard this story today which could help – maybe?
NationStar Mortgage requires short-sellers to first submit their home to Auction.com for sale – BEFORE the house gets inputted onto the MLS.
Auction.com gets a few days to sell the house to the highest bidder, based on a sales price that they determine after sending out an ‘inspector’ or two. Not sure if they are assessing the condition and/or value, but we know how Auction.com operates, and their system has one troubling flaw:
Their opening bids are ridiculously low to attract the maximum eyeballs – and once you put an ultra-low price on a house, it is hard to recover.
Here is an example:
This has been on the MLS since September, listed for $1,300,000 (apparently the agent didn’t get the memo about the new process):
http://www.sdlookup.com/MLS-130051639-4035_Royal_Dr_Carlsbad_CA_92008
But starting today and going until January 5th, you can bid on-line to purchase the property, with the opening bid starting at $500,000. They also advertise it as being a ‘Bank-approved short-sale’:
We’ll check back to see if they are having any luck – I have seen this house and we couldn’t get out of it fast enough. It is a wreck of a floor plan that has divided the house into two units inside.
The success of this program will be up to the lenders. Because Auction.com positions the offering to be a screaming deal, the lenders will have to be generous about their reserve prices.
But if they are going to do that, why not just foreclose and get paid immediately, and have the trustee-sale buyer worry about gettting the former owners out of the house?
The original mortgage on this house was $1.45 million, and it looks like no payments have been made since 2010. The balance owed is over $1,800,000. Do you think the reserve price will be under a million?
Realtors should breathe a little easier too about Auction.com’s attempts to get into residential resales. I doubt many regular home sellers will agree to an opening bid that less than half of their perceived value.
I have a little experience with the Auction.com scenerio. Put a bid on a cabin in the mountains May 2013, bid was not acccepted and it went pending with another buyer, They were asking $550K. Early December 2013, cabin shows up on Auction.com as an approved bank short-sale. Opening bid was $220K, it was an online auction. Auction opens and the price slowly climbs to $400K and stalls until the last couple hours of the auction.
Bidding was fast and furious and it reached $570k and the reserve was lifted. It went up a couple more thousand and the time was up. Auction.com has a rule that if a bid is placed in the last couple minutes, then a few more minutes are added until there are no more bids. The bidding finally closed at $582k + a %5 buyers premium = $611K final price.
This is where these “bank approved short-sale” gets interesting. The selling has the final right of refusal and has 15 days to accept the offer, if they don’t I guess it goes to the courthouse steps. The interesting thing about this cabin was that the seller originally wanted $50K for furnishings,spa, wood carvings, etc. outside of escrow.If the auction buyer got the owner to sell them their stuff, it would make the total deal $661K, on a cabin that was worth $550K.
The agent told me that Northstar made the auction a condition at the last minute after 6-months. Of course Northstar owns Auction.com!
You know for a fact that there will be shill bidders punching up the price as well.
All too often “short sales” are mere BPO free research schemes. Either the owner or lender is looking to prove a debt restructuring number. And of course agents go along as it pulls in potential buyers of this or other listings.
Thanks for the insight Steve!
Another of many examples of how buyers, in spite of all the internet tools to the contrary, will naively pay crazy prices out of ignorance.
You know for a fact that there will be shill bidders punching up the price as well.
Yes, standard policy there and they make no bones about it.
Put me down for 8%. Almost all in the first half.
I was curious if this is a new trend in real estate. I live down here in the Central Valley. I noticed a property went for sale about three weeks ago and the marketing remarks from the agent on the MLS are as follows:
“*AUCTION PROPERTY* Seller to offer property for sale at private auction auction on 01/11/14. Seller accepting pre-auction offers! get your offer in as soon as possible. This is not a foreclosure but is a short sale”
What does it mean “Private Auction”? Do you think the bank is involved in the auction since it’s a short sale? Did the seller hire an auction company to handle the bids?
Thanks!