Seems like a lot of properties in San Diego are going to Auction.com. Does Auction.com maintain a reserve price? I seem to remember that they take the highest offer to the bank and get back to you. In other words, I thought this was more of a gimmick. Is this true?
Yes - They have a “phony” opening bid. You don’t know what the real beneficiary top bid will be. The auction is run more like a show.
All that given, the “real” opening bid is sometimes low enuf to attract bidding by the professionals. At any given auction, there are properties that go to 3rd party bidders.
The first time there - it will be hard for you to determine whether all bids are coming from real bidders or from the auctioneer bidding on behalf of their client/beneficiary. They also will intimate you need to bid $5K over the last bid. You can bid anything you want over the previous bid. After a while you will be able to tell whether the announced bids are still coming from the beneficiary or whether all the bids are now coming from real bidders.
I just want to reinforce the prior comment based on personal experience. I went to one of their auctions and bid on a property. When you start bidding one of the auction employees runs over to stand next to you and “help” you bid. I hit my limit and quit bidding and clearly told the auction employee I was not bidding any higher. However he continued to bid as if on my behalf although those bids were actually on behalf of the auction client. That said there are some OK deals there. Like any auction you have to decide where your limit is and stick to it.
I haven’t had enough guts to call out a lower offer than the next step the auctioneer is calling. For example, auctioneer calls $200,000, someone raises their hand. Their next step is $205,000 and they keep going at $205,000 until the next bid. Sometimes when it comes to calling final call, they will then go 'anyone take it at $202,500". I haven’t seen anyone yet call out $200,500 or $201,000 to see if they will take it.
HI GJ, In all trustee sales the beneficiary (lender) gets to make the first bid which is the opening bid. The lender can substantially discount the opening bid and they can all bid as high as the amount owed on the foreclosing loan (published bid plus additional accrued interest). The lender can also instruct the auctioneer to do a low/high bid which means start with one amount and then bid as high as another amount. In most cases the auction.com minimum bid does not appear to have anything to do with the actual opening bid from the lender. It could be that the 205k is the actual lenders opening bid and they posted the 200k to get you to come to the auction. My guess is that you would only prolong the inevitable by trying to go lower.
Sorry, did not make myself clear. I meant to indicate that bidding had gone on for awhile (and assuming we are above lender opening). They continue to go up at 5,000 increments. I haven’t seen anyone “offer” 1,000 increment by calling out when auctioneer is doing final call. It would be interesting to see if they would accept it.
I have seen bidders break the $5K increment protocol by calling out a lower number than the auctioneer “asks” for. And when there are two or more bidders in the crowd, I have seen them slow way down and go in $500 increments. This is only after they have apparently met the actual minimum and they are trying to get the bidders to bid against each other.
Auction.com is a JOKE & should be flushed out of the trustee sale arena. An actual trustee sale is first and foremost an OPERATION OF LAW. Someone’s ownership rights, junior lien’s rights, etc are being STRIPPED at that moment. This is no place for “hotel ballroom auction” clowns and their circus antics.
And I fail to see what the lender/beneficiaries think is the big advantage of bringing yet another vendor parasite into the process. The trustee companies (who are already handling the foreclosure, posting, etc) were doing just fine also handling the auctions at the courthouse. What purpose does it serve to pay another parasite in the process chain & spend additional $ on a renting a hotel ballroom, advertising, etc? Do they really think that all this extra “zazz” is going to bring the crowds/public? First off the trustee sales are mostly done by professionals because it requires all cash and other issues. The sales must be done during business hours during the week. These 2 dynamics alone keep away most of the public. It’s like they’re trying to apply the hotel ballroom REO auctions dynamic to this venue. It’s retarded. These 2 venues are NOT the same. They can’t turn the trustee sales into the weekend, hotel ballroom, REO sale circus. Another big reason the REO sales are so well attended is because there is FINANCING… and the lenders actually own those properties. At the trustee sale, there is no financing and the banks do NOT legally own the properties so can’t just do what they want.
Little known fact: At those REO auctions, the “winning” bidder doesn’t actually buy the property at that price, they have merely “won” the right to submit their offer at that price which is subject to approval, counter, or rejection.
REDC sucks!!
We also need to start lodging complaints with the state AG’s office, local DA offices, and other govt enforcement agencies for deceptive practices, et al.
At a recent auction.com trustee circus, there seemed to be bids coming from nowhere. The bids were jumping but I could see no one actually bidding. So I got up and stood at the very back of the room and carefully watched all the bidders and sure enough, no real bidders were bidding but the auctioneer kept jumping the price.
Simplest solution: let’s all boycott these silly masquerades until the lenders see that the extra cost and possible liability of the REDC hucksters is a mistake and that the trustees can handle the trustee sales just fine down at the courthouse.
Christopher G. -
Since the fees and costs are set by statute - doesn’t matter how much the benef. might be paying auction.com in extra costs. (Assuming they aren’t violating the law.) As a practical matter, since the lender never comes anywhere near recovering its money - a junior lien or the home homeowner is not harmed.
As far as their REO sales - I thought it was well known that most of them are not sold. Some are (I know of one for sure in a bldg. where I had/sold a unit that I bot at a reg. sale on the steps.). Who is harmed by this activity? It may be frustrating to a newbie who doesn’t know the game. Since they are looking for retail buyers and offer financing in many cases, I’m sure they put some deals together.
On line auction homes keep coming back to be re-auctioned. We have seen several homes come back over 5 times. We have bid and were never PRE-QUALIFIED. You may be bidding against people that dont have the money and are unable to complete the purchase. Then if you win the bid you will be told that you did not meet the reserve and will be increasing your price to accommodate a banker.
I know this has been discussed in other forum threads, but it merits a repeat mention here. There are two general categories of “foreclosure” auctions that Auction.com regularly facilitates in CA and other states…
- Real Estate Owned (REO) auctions
- Trustee Sales
Under their “post foreclosure” REO auctions (aka bank owned), they disclose that the seller may or may not opt to accept the “winning bid” if it is lower than the seller’s (bank’s) minimum reserve amount. Hence, Christopher’s comment above - “we have seen several homes come back over 5 times.” What I don’t like about this tactic is that many newbie investors walk away from the auction believing they have purchased the property at auction only to later learn the bank wants them to pony up extra $$$ to meet the “minimum reserve.”
Under Trustee Sales, Auction.com must play by a different set of rules and must comply with CA Civil Code. The tuxedo clad Auction.com staff will generally rent out a community center or other conference facility and consolidate their sales in a particular area on one day that week. They quite evidently are working with lenders to post low-ball opening bids and they post these bids well in advance of the auction (trustee sale) date. This ensures that they will fill up the conference room with eager investors. Auction.com will often credit bid on behalf of the lender through the auctioneer, and this will steadily move the price up to the level where the lender is willing to sell to a 3rd party investor. This tactic differs from the minimum reserve amt in the REO auctions in that the auctioneer needs to credit bid right then and there (during the auction) and there is no one walking away from Auction.com’s trustee sales believing (wrongly) that they have just bought a property only to learn later (after getting emotionally invested) “oops … you didn’t meet the minimum reserve … now pay up.”
What I am curious about is how Auction.com “works w lenders” to come up with their opening bids? Is Auction.com contractually empowered by lenders to unilaterally determine and post opening bid amounts? Auction.com opening bids are often, in practice, “phantom bids,” because IF the lender does not want to sell at that discounted (below full debt owed) amount, then they (lender/trustee) will instruct Auction.com to credit bid up, up, up. This can happen at any court house trustee sale, but “credit bidding” is more common via Auction.com events.
Auction.com is clearly motivated to “pack the house” … and they know that posting low bids, and posting them early, will accomplish that mission. My guess is that they have made it clear to lenders that if you sign on the dotted line and allow us to do your trustee sales, then you MUST give us bids early and you MUST make them enticingly low. That would be great for many investors (except pros who oft benefit from late bids) but alas … is the bid real or just pure fantasy? I know how the game is played and understand that bids are often not real. My problem with the process is the long drive that I often have to make to get to the Auction.com venue. The time and money spent to get there is not inconsequential. So, if there’s only one Auction.com property on your list, the long drive is commonly for naught (phantom bid or postponement). Moreover, posting low/phantom bids, well before the lender is genuinely prepared to release (formally authorize) the property for “sale,” dilutes the credibility of the process. But “it works” and hence I do not expect any changes to be made unless they are written into State code. CA legislators … are you listening?
Danny -
Who is harmed by the practices of auction.com? Since any money bid would ALL go to the lender - if the lender doesn’t like the way the auction was/is held - they don’t have to use that method. After the first time, the prospective bidder knows how auction.com, working with the lender, runs the sale. If they don’t like it, they don’t have to partake.
Hi Mike,
Your point is well taken. Neither beneficiaries (lenders) nor 3rd party investors ?have to? participate at an Auction.com event. And as long as Auction.com follows civil code governing trustee sales, then I have no reason to ring any alarm bells.
My beef is their practice of posting enticingly low ?phantom? bids. This makes me less inclined to attend their events, which are held out of my zip code (typically 3+ hours round trip by car). It is sort of ?the boy who cried wolf? ? See bid, believe there?s equity ? surprise it?s just a phantom, now go home. So ?who is harmed?? Answer: The gullible and those who drive long-distances to attend Auction.com events. I guess it all boils down to ?credibility.? That?s something that is too often discarded.
If I were given the power to change State civil code covering trustee sales, I would require the lender/trustee to post their opening bid at least 5 business days in advance of the sale and no credit bidding by benes ? the bid *is* what it *is.*
Beneficiaries and law enforcement agencies (FBI) have taken action to prevent bid-rigging, or other violations of the Sherman Act, that have occurred at trustee sales. The FBI press releases note that steps investors? anti-competitive practices can/do result in the beneficiary getting less than fair value. In rare cases, this could also harm soon to be ex-homeowners (entitled to bidding overage). But I?ve seen no such regulatory concern over trustees? failure to post opening bids until the proverbial ?last minute.? Would auctions be more competitive if bids were required by law to be posted early (5 days in advance) and had to be ?real? (i.e. no credit bidding ? the opening bid *is* the price the lender is willing to sell to a 3rd) ? My guess is ?you bet!? There would be more participation by the investing public and the bidding would therefore be more competitive and would result in higher prices for beneficiaries. Of course postponements and cancellations would always be part of the process ? but at least investors would be provided with credible (real) opening bid data when properties are actually released to sale.
Nobody is going to worry about protecting investors. Az. does require opening bids the day before a sale.
In the old days, before you were born, 90% of sales in LA County were in the downtown area. That was semi-convenient for most bidders who were from the Bevrly/Fairfax Area and west. Now, many sales are held near the Orange County line in Norwalk - well over an hour drive for most LA County bidders.
(With one exception, I haven’t bid in LA in 40 years. Was very active there in the 60’s.) A standing joke used to be, if you wanted to hold a sale to discourage competitive bidding - schedule it for Santa Catalina island - which is, technically in LA County!!
In the old days, sale notices were not recorded and could be published in many obscure papers.
Mike … I’m older than you might suspect, but I’ll concede that I never took the boat ride to Santa Catalina for a stealth property auction ;). Sounds like a film noir sequel to L.A. Confidential or Chinatown? I’ve always thought buying at trustee sales would make a good book or movie. But no one would believe the outlandish stories. Truth truly is stranger than fiction.
At first I thought that Auction.com was making up their own low opening bids to draw in bidders but then I researched that the same low opening bid was on the Recontrust website. When the auctions first started there were up to 75-100 bidders in the ballroom. Ballrooms have gotten smaller and the crowds get smaller. Large percentage of postponements now and everyone is tired of the?Circus show and fake bids. Last month they kept stopping the auction because they thought someone in the audience was jamming the cell phones to stop competition. Honestly there are not any retail homebuyers with all cash bidding, so why can’t they just get real with the opening bids. Their percent of properties sold to 3rd parties has gone way down. Maybe Radar can run some statistics on that?
I believe (no proof though) that Auction.com has been contractually empowered to post bids on behalf lenders … who will likely credit bid up if the property ever gets authorized to go to sale. This (phantom bids) dilutes the credibility of the entire process. A point you make quite effectively above GJ. Interesting about the cell phone jamming. Now there’s a creative way to stifle the competition 
… probably a violation of the Sherman Act (anti competitive & bid chilling) and a few FCC rules too.
Phone jammers are illegal. You can’t buy one very easily, because of that. I haven’t seen any mentioned on the internet in a few years - maybe because there are more bands being used. Originally all cell phones were at 800/850mz. Then they added 1900mz. Now there are more like 1700 and 2100. (I’m a cell fone nerd in my spare time.)
Wish I could have been at that Auction.com event … “Hey, don’t jam me bro!” … guess that’s better than don’t “taze me.”
Almost had such a confrontation at the steps this morning. A 1st DOT was going to sale and the private party owner of the 2nd DOT had “pre-arranged” to buy out the 1st (before the trustee sale), BUT had not yet formalized the purchase by tendering payment … they opted to do so at the steps w lawyers present - cashiers check in hand. Another newbie investor was there to bid on that property. She got into a shouting match with the lawyer representing the 2nd (now officially the 1st after payment was accepted by crier and so authorized by trustee, thereby canceling the trustee sale). The lawyer was nicely, but ever so lawyerly, going to “offer you a lesson in foreclosure law.” This did not go over well with the disappointed investor. Just glad she was not packing a taser as it might have electrified things even further ;). Tears were shed when it became apparent that there would be “no trustee sale for you” today. Never a dull moment.
That’s an interesting situation on the steps. I had always thought that the legal requirement is that the default had to be cured more than 5 days before the sale date. However, I am guessing that banks are accepting any payment they can get up to the last minute - that would obviously be last minute if payment is made at courthouse steps.