Discounting Properties Taken To Auction


#1

On 07/18/2008 you commented, " 87% of properties taken to auction are discounted right now, at an average discount of 31%, and nearly 1 in 4 are discounted 50% or more".
Will you please clarify “discounted”. Discounted from the assessed value of the home when the loan was granted, discounted from the amount owing, or … ? I love your site.


#2

Hello - Sorry we weren’t more clear! When we talk about discounts we are referring to the discount from the published bid in the notice of trustee sale. The published bid is almost always the total amount due on the loan as of the original foreclosure sale date. So you should think of these discounts as being from the loan balance. Note that most loans currently in foreclosure are first mortgages (seconds have pretty much given up on trying to foreclose due to a lack of equity), and most of those first mortgage were made from 2005 to 2007 for 80% of the then appraised value. So a discount of 30% from an 80% loan would inidcate that opening bids are roughly 56% off the previously appraised value (80% minus 30% of 80%). Thanks for the nice note!