Fraud at the San Diego Auction by the auctioneer

ledge, was reading the post and I work in Phoenx AZ buying foreclosures I have an old partner from San Diego that was relocated to Bosten and now back to San Diego and we need a guy that has a Bid Service there. Is this something you do or can you point me to someone?

I think there is more than 1 misunderstanding here. Me, I am still trying to figure out what exactly the real situation was.

Who was the foreclosing lender, the 1st, or the 2nd? It sounds to me like it was the 2nd that was the foreclosing lender. That should been easy and of course extremely vital to determine before the auction.

Again, which lender foreclosed? The 1st or the 2nd?

The first foreclosed. We believe the 2nd was the successful bidder.

Thank you Sean, that was fast. If the 2nd was the successful bidder, and they got the property for about $93,000, then something does seem wrong. They bought it from the point of view of a 3rd party investor knowing that the 1st is forclosing. Even if the auctioneer said they would bid it to $180,000, the other investors would have bid say $175,000 would have done so and the 2nd would have bought it for $175,001.
I wonder if this is a new tactic being used that the regulars are not used to, and rather than take the risk of bidding before they know what is going on, they just dont bid on it.

Nothing new, has been done for years and years - just not common recently as there have been few seconds showing up to protect their position since there has been so little equity, and therefore nothing for them to really protect. So for anyone who hasn’t been on the steps for 5+ years I can definitely see how this would seem suspicious. As I mentioned earlier, I’m not a fan of high low bidding, and in general don’t think it should be allowed. I just don’t think it’s fair to blame the auctioneer.

Good to know, thank you. They would compete with other 3rd party bidders in that case, even if its a high low bid, other bidders would have been say 100k, 150K etc.

It would only seem suspicious to someone who clearly doesnt have the slightest clue what they’re doing. Unlike “onemadbidder” some of us actually do this for a living. The auctioneer actually did you a courtesy by annoucing the the amount he was bidding some won’t which is a huge wast of everyones time .

I am just not getting it, sorry. Maybe some more coffee will clear things up

For those who have not witnessed this game … a high low bidding tactic is in play when a “low” opening bid is posted by the lender to induce investors to come to the steps looking for a screaming deal followed by the auction day realization that the lender/bank will bid through the auctioneer up to a predetermined level [“high”]). To save everyone time, sometimes the auctioneer will (thankfully) pre-announce what the “high” bid will be. Frequently this “high” bid takes away any profit (equity) potential on the property. So most investors back away at that point and won’t qualify or bid. Yet the bank will take the property back at their “low” opening bid amount. I’m not sure about the accounting rules, but it seems to me, that in certain instances, the bank can book an artificially high profit on the subsequent REO sale if they take the property back at the “low” opening bid amount when it’s clearly worth substantially more (albeit not more than the “high” bid). There’s nothing that prevents a steps investor from stepping forward, qualifying to bid, and then bidding somewhere in the $ vicinity that would make that property a profitable steps buy … yet still well below the “high” bid that the auctioneer has pre-disclosed. It may seem like a waste of time (since you know you won’t match the lender’s pre-announced “high” bid). But I gain some satisfaction knowing that the bank will have to book the steps take-back (now REO) price above their “low” opening bid. I agree that the high low bidding game by lenders is just that a “game” and there ought to be a law against it.

I should qualify my comment by saying that it’s my understanding that any lien holder (e.g. 1st, 2nd, 3rd DOT holders) can bid through the auctioneer, and I am much more sympathetic to a 2nd or 3rd DOT holder who is bidding above the “low” opening bid amount as they may be defending their position. I have even more sympathy if the 2nd or 3rd is a private party (dumb, just dumb to let themselves be in this position) not a bank, and they stand to lose big if they don’t protect. Sometimes the numbers don’t pencil out (senior loan payoff is just too high) and these private parties just need to walk away badly burned.

Ledge your right on about all your information except the Escalade, it’s a Porsche Cayenne and a Mercedes he drives;) Additionally his wife Melinda Ung was the listing agent. Very entertaining!

I can give a few good reasons for a low/high bid.
Main reason: IF the lender bids in the full amount owed AND there is a fire that destroyed the house the day before, the insurance company can argue that the lender suffered no loss as the amount bid satisfied the loan in full. There was an appellate court decision to that effect 20 some years ago. Don’t know if that still stands. OTH, the lender doesn’t want to let it go too cheaply. That’s why a low bid where the auctioneer bids it up in increments to a high bid.
Minor reason: If there is active bidding starting at a low bid and a bidder wants to waste everyone’s time by making a bid knowing it’s just going to be run up, it sets a figure the lender may want to use to establish value.
In this case, if it were a 2nd holder bidding, they would only want to tie up a minimal amount of cash. There would be no reason for them to bid in the full amount of their debt.

Very interesting Mike. Thanks for contributing!

After viewing this post, I was wondering is it legal to video tape or stream a courthouse trustee auction?

Sure. Public location. See our video of the San Diego auction here: http://www.youtube.com/watch?v=1CanJbhGdJM.

As I suspected it appears that this property was purchased by the 2nd lien holder - Wells Fargo. Please see the trustees deed recorded on 2/25/11 as document number 105593 at the San Diego County Recorder.

Well … there you have it! Thanks Sean for doing the background research. A tempest in a teapot all along. At least this thread produced some healthy debate and valuable info for all steps buyers.