Jason Hidalgo, writing in the RGJ, has a story on one person’s experience at a real estate auction and the increase in the popularity of auctions as a way to sell bank owned real estate.
Auctions typically conjure images of lightning-fast talkers and adrenaline-pumping bids.
But it doesn’t always work to the best interest of the bidders.
“The price was about half of what the property was originally listed for,” Ho said. “So, you can only imagine how happy I was.”
Ho went on to fill out even more paperwork and was told he would get a call about the property within a day. But once the call came, Ho’s excitement fizzled out as he played the message on his phone. Ho was told that the seller will not sell the property at the price that he bid for. Apparently, his bid didn’t meet the auction’s reserve price.
“They said they wouldn’t sell me the property unless I raise my offer by more than $20,000,” Ho said. “I felt like they were trying to shake me down, and it left a bad taste in my mouth. I ended up saying no out of principle.”
My observations essentially agree with Hidalgo. The auctions today are only pretending to sell properties while in truth they are building a huge list of buyers. Just as Ho expressed, a winning bid is merely an opportunity to squeeze the buyer for more money. My observation is that a very small percentage of the properties auctioned actually close and a smaller number yet close at the bid price. And while the bank is stalling, they still hold the buyer’s deposit money, thus keeping the buyer out of other investments.
Auctions are a very good way for banks to dispose of their huge inventories of foreclosed properties. It can be a much more efficient and economical process for them rather than listing the properties one by one through the MLS.
We had first attended auctions near the end of the RTC debacle in the mid 90’s and had purchased a number of properties at that time. Our experience was very favorable. They were serious about wanting to sell their properties. Today it seems that they are in no hurry. We, likewise, are in no hurry to bid.