Are there any kind of checks and balances to make sure auctioneer’s do their job correct and ethically? I read in another post about someone questioning foul play of the auctioneer by allowing requests from investors to auction this property first or last. That seems very unethical, even illegal to me. I also thought about the scenario discussed before of the practice of a private auction between just one bidder or a few bidders instead of an open market of bidders. I also thought about other games that could be being played because of their being the same auctioneer and a lot of regulars at the courthouse steps. These practices may be illegal, but there’s so much money involved. How do we know it’s not being done?
What could possibly be wrong? In larger counties, sales can take hours. What harm is there by asking the auctioneer to put a sale that will attract bidding at the top rather than make bidders stand around for hours while the auctioneer reads postponements or sales that are not of any interest?
As far as “holding” a sale, the auctioneer will usually ask if there are any objections to delaying the sale. Many banks don’t announce if a property is going to sale until sale time. What harm is there by giving bidders 10-30 minutes to see if the property in question is worth bidding on?
Thanks for your reply. While I agree with you on allowing the bidders at least 10-30 minutes time when a opening bid below the estimated bid is announced, I disagree on the the request by the investors to auction a specific property 1st or last. That leans towards favors being done for certain investors, on Ebay, you can’t legally ask the seller to end an auction early or allow more time to bid. Although there’s not an exactly time when a property will sell like Ebay, the rules should be the same for everyone. Though, I do have less of a problem when that is done for good faith reasons than I do with the other things I questioned whether there are checks and balances for.
The list is random and there is no prohibition that I am aware of against the auctioneer calling the auctions in any particular order.
I can tell you that there are several ongoing investigations regarding the actions of investors at trustee sales. You can easily search the internet for articles that have been written on this subject.
I don’t agree with the practice of delaying the sale of a property when it’s done to placate or otherwise benefit an investor team working the steps. The most likely reasons for a “request to delay” (by an investor team) would be to give an investor group time to do sufficient research on a property with a last minute (surprisingly low) opening bid or perhaps give a team time to shuttle sufficient cashiers checks into the hands of their designated bidder. A delay of even a few minutes can be a big advantage to a well orchestrated investor team. Why do I object? Because we all have the same opportunity the week, day or night before to do our research on properties and you are either ready on the day of the auction or you’re not. When opening bids are posted at the last minute, this is often the only real advantage offered to those who have done their homework.
It’s not that I don’t see the folly of lenders posting last minute opening bids … especially when they clearly want to unload the property. Opening bids posted well in advance will generate more investor attention. On many occasions I’ve rolled eyes out of frustration when lenders fail to post the opening bid until virtually the last minute … It’s no fun to see a good one (last min low bid) that’s about to slip out of your grasp because you don’t have time to complete the essential due diligence before you bid. On the other hand, if you’ve done your pre-work (sometimes many hours in the county recorder’s office and driving out to the property for a look/see) and the opening bid is last minute and low … you say to yourself a silent “hooray” and then deliver up your best poker face as you qualify to bid. You also hope that no one else has done as much pre-work on this property. You may win this time or you may lose to someone else who has also done their due diligence … but don’t give any team an extra “time bonus” advantage by delaying the sale. just sayin
FWIW, I want to add that despite the accusations of shenanigans by some investors and/or auctioneers at steps sales, by and large these auctions are done fairly, properly and often with robust (competitive) bidding. I’ve been to many dozens of auctions in half a dozen Northern California counties and I’ve seen and heard just about everything … While most of the “action” (before, during and after the trustee sales) is in the spirit if not the letter of protocol, there is very clearly some room for improvement. With the exception of some recent undercover FBI visitations at the steps, the only marshal (if you will) present during steps sales is the auctioneer. I believe the auctioneers can go a long way towards improving the process by sticking to protocol. Auctioneers playing favorites with certain investors can be a big problem and certainly looks bad (auctioneer sidebar chats/whispering and any passing of notes, etc. should be avoided). IMHO Auctioneers can/should also be trained to look for (and formally report) any possible paying of “walk away” money or other impropriety. Yes, “bid chilling” has happened in the past and “anti-competitive” practices has been one of the focuses of recent FBI attention (77 steps investors very recently received subpoenas). For those who are curious, you can Google the words “bid chilling” “bid rigging” and “foreclosure auctions” (use the quotation marks in your Google search) and you’ll come up with the recent FBI PR and articles in the press on topic. IMHO our taxpayer $ would be much better spent going after pre-bubble rogue lenders and others who perpetuated mortgage fraud that helped to pump up the housing bubble. Steps investors are mere minnows in shark infested waters, but it’s apparently politically correct to go after the group who are recycling foreclosed properties and thereby helping to clean up the mess.
Thanks for your replies. Danny, I definitely agree with you that it should be an equal playing field. Also, it’s good to hear that most of the business is done on the up and up, hope it’s the same where I do business in SoCal. IMO, it’s ridiculous to have the auctioneer as the only “marshall”. There should be checks and balances of the auctioneer themselves and a watch of any signs of bid chilling already in place. These are auctions of properties in the hundreds of thousands, not small ticket items.
I disagree on your last point though, I would say the rogue lenders and those who perpetuated mortgage fraud were the minnows in the housing crisis, the sharks were the employees (especially the heads) of these investment banks who bought and allowed there to be a big market for these 100%/subprime/stated loans. And the only punishments they seemed to get were million dollar severance packages.
Thanks Alan. IMHO blame for the melt-down can be spread all around. FWIW I wrote an article on topic in 2008 > http://www.firesolutions.com/news/ThePerfectFinancialStorm_2008.pdf
What is the harm, IF, when a potential bidder asks the auctioneer to delay the sale for 10-20 minutes AND the auctioneer asks "are there any objections to this sale being delayed? " If someone is ready to bid, the sale goes forward. If no one objects, the sale is delayed. The alternative, if the sale isn’t delayed, no one will bid and it will go back to the benef.
Hello Mike, I answered that earlier in my ebay analogy. What if everyone asked for a delay of every sale? I still don’t really think it should be done because it is a favor and it should be the same rules for everyone. At the least, now the bidders have to answer that question too and it can show their interest in the property to other bidders. Again though, I have less of a problem with that scenario you described than I do with the other things I questioned whether there are checks and balances for.
Danny, will read, thanks, I agree there is blame to be spread to everyone, but I feel the IBanks and their heads are the most to blame and least punished.
This isnt ebay . Why would anyone not want to make the most informed purchase they can when spending anywhere from 100,000 to 1,00,000+ on an as-is where is property ? I’ve asked auctioneers to hold properties on dozens of occasions. Trustee sale properties have any number of variables that can cause even a seasoned investor great losses. An extra few minutes to double check your information doesnt seem illegal or otherwise.
Brian … I have no problem (agree with your points) … as long as the sale is delayed with a clear and open announcement to the assembled steps investors (e.g. “I have received a request by an investor for a 10 min delay on this property sale, does anyone have any objections to putting this sale off until the remaining sales [also scheduled here/today/now] are completed?”). This would give an investor who’s prepared to bid then/now the opportunity to object to the delay and force the immediate sale of the subject property without any special change of order. My problem with these “requests for delay” is that they are often made via a side-chat with the auctioneer and in a whispered tone (not audible to the assembled competition) and further, the auctioneer does not always make any announcement that such a request has been made and will be granted.
Brian, my point on the ebay example is to show the fair practices of a very successful company, no buyer can delay or speed up the sale of an item, all buyers have the same time to do their due diligence, if anything it should be more strict for these high priced properties. As I mentioned, I have less of a problem with what you requested, but I still feel it should be the same rules for everyone. Especially like Danny said when these requests are done via side chat and not always announced by the auctioneer.