Indicators of bank reserve value for auction?
Hi all,
I'm attempting to be as strategic as possible in establishing my target (not maximum) purchase price offer for a property. I believe I want it to And I'm looking for whatever I can find to tease out how high the seller's reserve price is. Any suggestions on how to clue in on the bank's reserve price would be welcome. I know I won't find a hard rule and that it "depends" on many many variabes, but I'm looking for "clues".
CLUE 1) STARTING BID(YES?) In looking at multiple REO's currently under auction (at Auction.com) in the same zip code, they have respective starting minimum bids of $15k, $20k, $40k, and $60k. This is ~15% of appraised value (for the $15k, $20k, and $40k properties) and ~30% for the $60k property (which is ironically $100k lower appraised value and the 2nd most highly valued behind the $40k min bid property). So I'm wondering if they have a lower reserve for the first 3 (at 15%) than the 4th (at 30%) even though one of the first three has a higher appraised value.
CLUE 2) COMPS (YES?): Nearby comparables on $/gsf basis. Yes, probably, but at what multiple since it's going to auction... 70% recovery factor, 80%, 90%?
CLUE 3) LIEN VALUE (NO?): Mortgage on which the bank foreclosed originally. Once the borrower defaults and the property goes REO, I'd expect the bank just writes-off the mortgage value and writes-in the current appraised market value (the delta is them truing up their financial position for stockholders). Certainly they aren't likely to get the full value all back if the property was so underwater that a shortsale path wasn't taken.
CLUE 4) AUCTION ROUND(YES?). Do they drop the reserve ~10% for each Auction round that the reserve isn't met. i.e. ~90% for the first attempt, ~80% for the second, etc.
CLUE 5) RULE OF THUMB (N0?). Is there a RoT used in the industry that roughly covers all of the above?
Any other suggestions or links to other forum threads?
Thanks,
Cole