I’ve been asked a lot about these foreclosure/bank owned auction sites… well, I can now tell you from experience what they’re like. First, I can tell you, if you see a home on the MLS, priced too low to to be true… that’s because it is. These sneaky auction agents will post the home for sale to the public really cheap, but they don’t mean it, it’s just a tease. They direct you to the auction site, where you have to bid on the property. And 90% of the time, it’s going to go for much more, because it’s worth more. Typically, you don’t get a screaming deal with an auction site. A home is worth what it’s worth, and that’s determined by the potential buyers. It’s simply a supply and demand thing. That’s how it works in a normal sale, it’s also how it works in an auction… with one exception (sort of) If the house is truly distressed, and a traditional loan would not work, that cuts the buyer pool way down. All that will remain is investors with cash. And there isn’t an investor out there that will pay market value for a home. In the case of our newest addition to the Jones Crew family, we found a house that no one else wanted. (except maybe that one person, but clearly we wanted it $1,000 more than them) On the plus side, now I can tell you how this auction site works.
First of all, there are fees. Beware that the price you pay will also have 4.5% added to it, plus a $299 tech fee. You will also need 3% earnest money, and they reserve the right to sell the property out from under you until that money is in their clutches.
Their clutches, known as Escrow, is chosen by them. On a house in this price range, I expected the escrow fee to be around $400. After MANY attempts to get those fees disclosed, they finally sent over a HUD-1 (a form we no longer use in the business) and their fee was actually $1,215. (despite all my efforts, I was never told why)
The process is not like a normal real estate transaction. When you try to contact the agent for the code to show the home,you’re directed to another site, where you are sent a code after verifying credentials. You also don’t just look before you buy… inspect before you buy. You’re likely buying the property with absolutely no inspection period, waiving your right to back out. An As-Is sale, in the Auction world is truly as is…
We waited to bid, till the auction was just about over. That was when we discovered that each new bid extends the time by 15 minutes. There is also a reserve that must be met. The banks are not in this to lose more money than they already have. They will make sure that they get as much as possible, and then pass on the fees to you. If the auction doesn’t meet the reserve, it starts over. (And that reserve is the value of the home in As-Is condition.)
Once you’ve won the bid, you’re sent a contract. This contract is 23 pages that can be summed up like this. “You will give us all the money or we will sue you, you are waiving all rights and you will make no decisions.”
They do warn you that until the contract is signed by you and the sellers representative, and the 3% earnest money is received by their escrow company… they can still sell the home to someone else. That doesn’t mean you have a right to change your mind, by bidding, you’ve agreed that you are buying the home, no takes backsies. If you don’t send them the earnest, they have the right to come after you. (is the jist of what you just signed)
Next… you wait…. and wait… and wait. Since the agent has no hand in it, you spend a lot of time wondering if you’re supposed to be doing something, or if you’re still waiting on them.
If you have questions, just write them down on a piece of paper and throw that in the trash. This way, it is more likely to be answered.
We were finally sent a copy of the contract, signed and instructions on where to wire our money.
Their escrow is not in this country, I feel confident about that. I’m not sure where they are, but it’s in a place where normal names contain 15 random letters. Communication is slow and confusing. They also feel the need to send you their resume whenever you change hands in the escrow process. Which you do a lot, since each person is only in charge of their one phase. Opening a file, running a title search, preparing to close, and actually closing… those are all too difficult for one person to do, so they need 4 to do it.
Our sale was pretty straight forward. We give them money, they give us a house… there wasn’t any complications to it, thank God. We are still confused as to when we actually get the house. When bidding, we opted for a 25 day close. When we receive the contract, it was for a 30 day close. When we received the HUD, it was for a different date, and in correspondence, they were a little demanding that they get the money 2 weeks early. My many attempts to find out when we get possession have been ignored. Next I will try writing it down an throwing it away. I feel that having sent them all of our money and their closing instructions stating that they will be removing the door knobs and locks the moment we close, so we better be ready… we should be in the loop on that close date…
But we wait… and wait… because Hubzu is bullshit… and I’d like to avoid them if at all possible in the future.
That being said… I hope you’re all ready to join us on our next renovation adventure!