Auction.com had two properties go to sale and were bid higher than their opening bid, but FR is showing back to beneficiary for their low opening bid. Maybe the bank had a reserve price/bid on behalf of benificiary like I heard auction companies do for REOs, but I thought they wouldn’t do that or be allowed to do that for actual trustee sales, are they? Even if they are, shouldn’t the winning bid be what the property went back to the highest bid of the benificiary and not their low opening bid because that seems illegal and creates several benefits I can think of for them in regards to taxes, paying off debts, equity to owner, etc.
I think you need to be a little more specific. Were these properties being sold at a public trustee sale auction? Or are you talking about REO (post foreclosure) sales on their website or in a ballroom?
If it is a trustee sale auction, the auctioneer must call out the bids from the beneficiaries - and note that they are bidding on behalf of the beneficiary. They are supposed to call out the bids during the auction as the other bidders are bidding above the opening bid. However, the Auction.com trustee sales are very confusing as they go along and they are very quiet/elusive when they are bidding on behalf of the beneficiary. Sometimes when the sale is over you cannot tell who had highest bid - someone from the floor or the beneficiary? They just call out ‘Back to Beneficiary’ which means that noone bid over the bank’s high bid amount.
GJ said it all. They never tell you the Benificiaries real high bid in advance. You have to listen closely to hear that the property went back to the lender.
I don’t think it has to be announced that the shill is bidding for the Beneficiary. The “legitimate” Trustee auctioneers make it clear in the few instances they have a low/high bid and do the bidding themselves. They don’t have a separate body acting as a shill.
Thank you GJ and Miket, yes these were trustee sale auction. What I think is not right/maybe even illegal is the property showing back to beneficiary for their low opening bid. I don’t think it’s a mistake by FR and feel both the lender and auction.com benefit by that. The lender receives all the benefits of taking the property for a lower price (maybe lower property taxes, writing it off for losses, etc.) even though it was bid higher and auction.com gets to advertise these deals to potential buyers (increasing investors competition) saying how these properties could have been good deals “if only” someone was there to bid on this cheap property. Wouldn’t it be more accurate and less question of anything fishy if the back to beneficiary winning bid was the highest someone bid it to or the banks high bid?
Think about it. Who would benefit by your alleged conspiracy scenario? The lender gets the property for a lot less than was owed. Either way the loss is the same. The lender, when it takes back the property, gets to try and get retail. If it let the property go for a low price, then the evil fcl. buyer makes money at the expense of the lender. Tax assessors use the “comparable price/value” method when appraising properties - not some number on a Trustee’s Deed or a non-arms length transaction… As far as income taxes, the loss would be the diff between what was loaned and what was netted on the sale of the property. The number on the Trustee’s Deed is meaningless.
You make some good points miket, I take the “evil fcl buyer” as tongue in cheek. You could be right on most of your points, but don’t you agree it is more accurate for the back to beneficiary bid to be either the highest bid someone made or the banks high bid? Doesn’t not doing that reek a little bit of “clever accounting” and they are benefitting?
Bank loans $200K.
They wind up taking back title to the property at fcl. sale. Makes no diff. what number they put as bid price. When the property finally is sold on the market for $100K - they then take a loss of $100K.
I think what you are saying is - they take back the property for $50K and show that on the Deed. You think they can then show a loss of $150K. IF they did that, when they then sell the property for $100K - they would have a gain of $50K over the $50K they showed on the Deed. Their net loss after all that is still $100K.
What I want to find out is - Is it true that the banks don’t have to show losses on their loans until they actually sell the property, which is why they aren’t anxious to dispose of inventory.
At regular courthouse steps auctions the auctioneer usually warns everyone at the beginning of a specific sale “High bid from beneficiary is $XXXX, does anyone want to bid?”. I have seen several cases where a bidder does start bidding opening bid just to force auctioneer/beneficiary to bid up to high. Bidder stops just before the high. Not always, but sometimes.
Often wondered if there was a reason that bidders want to force a higher ‘winning bid’ onto the beneficiary?
RE GJ’s point above … ditto. Seen the same thing. A few bidder’s will regularly ‘qualify’ (show checks + ID) and ‘bid’ these low/high’s simply to force the ‘bene’ (auctioneer bidding on behalf of) to counter bid up to the vicinity of the pre-announced high bid. Once the bidding has reached the point where the profit potential has been all but ‘squeezed out,’ the investor will capitulate and let the bank take the property back at that elevated bid price.
As far as the bank/bene accounting for their losses and gains? That’s over my head. So much changed after the 2008 meltdown. ‘Mark to market’ changed to ‘mark to model’ which allowed banks to defer losses until they were ‘realized’ (via sale). Then you have to consider that many beneficiaries, who now own loans going to trustee sale, are not the original bene. Many of these non-performing loans were purchased (assigned to new bene) at a major discount. So what looks like a loss, may in fact be a gain.
Whether investors are acting nobly or simply wasting their breath when bidding up these ‘low/highs’, remains an enigma … or at least to those, like yours truly, who played hookey during accounting class ;).