How will auction market be when there is less inventory in a few years?


#1

?How will the auction sales market be when there is significantly less inventory in a couple years??Will it still be possible to get a decent return as a career or will there be so few sales and starving investors that it’s better to find a new business avenue? ?Any long timers around that can talk about conditions before the glut of foreclosures (although conditions then don’t necessarily predict what would happen if those conditions return)? ?I really appreciate any help in advance.


#2

? ? Bidding at foreclosure sales in Ca. has always been extremely risky. ?I bought my first property over 50 years ago. ?Even in LA, which was/is 10 times the size of Alameda County - there were only 10-15 “regulars”. ?When I came to Northern Ca. 40 years ago, there would often only be 2-4 people at a worthwhile sale. ? There were many weeks where there were no sales worth while the entire week in Alameda or Contra Costa. ? ?These were the days before lenders made loans greatly exceeding the value of the property at the time the loan was. ?made.

? ? There have always been ups and downs in RE - but nothing like the recent crash. ?Before the crash, the type of people that showed up to bid were individual entrepreneur speculators - making their own decisions bidding with their own money. ?They knew the risks. ?Now you have Wall Street type investor groups who send a clerk to a sale with instructions - or ?- to call in at the last minute when the sale is taking place and to, in effect, let the boss bid by remote control. ? Some of these “types” are already disapppearing.

? ? ?Outfits like Auction.com will be gone by the end of the year. ?Their volume (when acting for the Trustee) has already dropped by 2/3 in the past 4 months. ? ?I assume their REO sales volume has dropped as well.

? ? ? Bottom line - when things return to normal there may be more than the half dozen regulars following sales - but not enough volume to support many more. ?(I’m talking about Bay Area Counties.)


#3

I am more of a ‘Johnny come lately’ than Miket, and hence my perspective is limited… That said, no question that many of the players who recently arrived (post 2009/2010) to ‘steps buying’, are pulling in their horns … and that’s a good thing! It was frustrating to waive goodbye to so many opportunities over the last 6 months due to competition over-bidding (overpaying) by some groups/institutions who cobbled together investor (other people's money - OPM ) to play at trustee sales. Much of the overbidding (overpaying) had **not hurt these groups, as the deals still delivered the target ROI and real estate price appreciation over last 12 months has turned many ‘dubious buys’ into winning investments. But with rents leveling off + **shrinking supply of trustee sales + still too many groups using OPM (and not **doing careful **due diligence - DD ), many ‘over-pays’ are now beginning to turn into losses or ‘below target’ ROI. Consequently, some of the more savvy investors/institutions (providing the ‘OPM’) are now directing their managing partners (so-called ‘pros’ doing the DD and directing bidders) to be more circumspect about what/where they buy and how much they pay. I expect many of the ‘over-payers’ will soon be forced to ‘move on’ to other pastures. And again… that’s good, as there will always be opportunities for those who pay close attention and do thorough DD.


#4

Excellent Comment!


#5

I’ve been in this business since before you were born - 1963. ?While there have been ups and downs over the decades, nothing ever changed until the crash in 2008-2009. ? Until then, only professional bidders (individuals) risking their own money, were involved. ?The numbers were relatively small. ?Starting in 2009 you had large money funds playing with OPM (Other People’s Money) who were paying 85-90% of value. ?Professionals, knowing what the risks really are, only paid under 70%. ?The only time they could/can compete is when they have some special knowledge of a property or area. ?The “Hedge Fund” groups have almost disappeared in the last six months in some counties. ? A few are still around. ?They will be gone within a year. ? This business lends itself to individuals in local areas - not nationwide decisions and management our of remote locations. ??