The Trustee Auction Sale…what’s it like?
The auctioneer will ask if anyone wants to qualify, either before all properties are announced or before individual properties are announced. To qualify, tREO consistently has well over $2 million in cashier’s checks at various bid sites, sufficient to cover any bids that we will be making that day.
Foreclosure sales are commonly postponed (90% of the daily list) for many reasons, some because owners are trying to save the property, others because the lender needs more time for proper processing. tREO tracks our targeted properties making sure to record postponement dates and reasons for postponement. Keeping an accurate database is essential. When a property has postponed many times, other investors will sometimes lose track of properties thus reducing competition at the actual sale.
Trustees, appointed by banks, are the ones usually processing a foreclosure, typically the only information they will give out regarding a property will be the date, time and location of a sale along with a bid if it is available or a postponement date and reason if the sale postpones.
The Bid
Reduced Bids are usually available the day of the sale, shortly before the property is announced for bid. When a reduced bid is identified, there is a good probability the property will be going to sale instead of postponing. Published bid amounts may differ from the actual bid amount at the sale. Sometimes they will be slightly higher to cover actual costs and sometimes the lender will reduce a bid making a property an attractive purchase to private parties, who sometimes get into a bidding war with lots of gamesmanship.
Bidding
The auctioneer asks if anyone would like to bid when they are auctioning a property. If it is a property we are interested in, our bid will start at a penny over the opening bid. The property will not sell until the third call and some people like to wait and see if anyone else is showing an interest, sometimes being overlooked at the final call. Our bidders are taught to relax and wait to see if other bidders are going to jump in, if no one does we put in our “penny over” bid just before the third call. If other bidders are interested in the same property, bids will go up usually in five hundred dollar increments until a winner is announced.
Due Diligence
tREO does all of our due diligence before the bidding, including visiting the property and trying to contact the tenant or home owner. We do all comps, tax, title and pricing analysis, because the auction sale is “as is’, where is”. This can be a highly risky investment for speculators who do not have a wealth of due diligence resources to efficiently evaluate a selection of properties in less than 2 hours. We know the maximum bid we are willing to place because of our strong due diligence procedures
The Successful High Bid
When tREO is the successful bidder, we sign cashier’s checks over to the Trustee. Usually, after all sales are complete, the auctioneer will write a “Trustee’s” receipt, ask how title is to be held and at that point, we are the owners of the property.
The Trustee typically records the Trustee’s Deed for us or they send us the deed along with any excess funds from our checks. Sales are sometimes invalidated for legal reasons, if so, we receive our funds back, usually in 14 days or less.
