Only cash only can buy at auction - Is this true ?

Question

First time home buyer. Trying to get good deal. Was thinking of buying home at auction(with help of some agent).Talked to an agent and he said he helps people bid on short sales.

He said the banks are not willing to sell house to people who need financing since lots of cash buyers available. Is that true ? If I pay the deposit at the auction and arrange for financing within 30 days.....even then will the bank prefer to sell it to the cash bidder ?

Mike G. · Answer

Guarav, if you are looking for a house to live in, you should be able to get a deal however you buy, because you will likely be willing to pay more than an investor.

Here in California, there is no "sheriff's sale".  It is called a Trustee Sale and the auction is handled at the courthouse.  But yes, for these auctions, you must pay all cash and you should really know what you are doing, because you can get quite screwed.

There are also other types of auctions that you can look into.  One kind is a post-foreclosure auction, such as can be found on auction.com.  These are bank-owned properties, which means they have gone through the Trustee Sale already and now the bank owns them.  They will be much safer for you to purchase at because liens will be removed, and you may be able to do an inspection on the home (I think).  Also, many of the homes sold at these types of auctions can be purchased with financing - you don't need all cash.  And you still may be able to find a good deal there.

You can also look into probate auctions.  In these, the owner of the house died and the home is being sold.  Typically, you have to go to the actual house on the day of the auction and bid there.

You can try the short sale route.  It usually takes a really long time.  Very few short sales go through in Southern California, though maybe with recent new laws that will change.

Another thing to look into is buying an REO.  These are the same houses you would get at the post-foreclosure auction, except they're not up for auction - you just make an offer for one that is on the mls.  You can do an inspection on these homes, but the bank will usually not do any repairs, so you are buying the home as-is.  As an owner-occupant, you should be able to get a good deal on an REO property.

Good luck!

Jon Holdman · Answer

Not sure how sheriff sales work in CA.  Here in Colorado, you have to pay cash on the spot.  If you're getting financing, then lender has to be there with you with cash in hand.  No conventional lender will do this, but I know at least one hard money lender who will.

You're better off, in your position, making offers on REOs.  Properties the bank already took back at the sheriff's auction.  Look at a LOT, dozens, even 100.  Make a lot of offers.  Eventually you will buy one.  Last one I bought, I would look at about 10-12 houses each weekend and make 3-4 offers.  Eventually I had two accepted, one a REO and one a short.  But the lender never approved the short.  I bought the REO.

Steve Babiak · Answer

If the borrower is deceased, then to buy before sheriff sale you would be buying it from the estate of the deceased. Involves things like probate, executors, personal representatives, etc.

The notice posted on the property was put there by the lender's property preservation contractors. The mortgage / deed of trust will almost always contain provisions that allow the lender to take actions to secure the property and preserve value should the property be determined to be vacant. That can happen even before it becomes REO, before the sheriff sale. So I don't think this property is REO at the time of this writing.

So it sounds like a mortgage foreclosure will be taking place at an upcoming sheriff sale. Perhaps your research for liens was not quite thorough enough. You will need cash to bid at sheriff sale.

Michael Lauther · Answer

In a short sale in NY, you are buying the property from the owner and the bank agrees to take less than they are owed. In a sale on the  courthouse steps you are buying the property from the bank who has foreclosed.  Banks will often consider an offer for a short sale with documentation of a down payment and a letter from a lender indicating they are willing to lend based on the credit of the buyer but will need documentation and of course subject to title search, appraisal, etc. I am not sure about what they would require on foreclosure or for a bank owned property.

Gaurav S. · Answer

I meant Sheriff sale.

Kevin Rain · Answer

If you were using the property as a personal residence, any ideas on how to come up with the cash if you don't have it? HM lenders won't lend for a personal residence. As soon as I acquired the property i would refinance with a conventional mortgage. The property I am looking at is handled by the courthouse, is on auction.com, and is not a REO. Similar circumstances as above...owner passed away and owes $400k in principal, interest, taxes etc.

Rick H. · Answer

it appears that @AW Eilers "hijacked" this old thread from 2011.

As other have posted, there are many types of auctions intended to liquidate real estate.

Some are forced sale auctions such as sheriff sales which are judicial, meaning conducted pursuant to court order. Others are non-judicial and conducted by foreclosure attorneys or trustees and in some case real estate brokerages and online operators such as auction.com who may be selling bank owned property, post foreclosure.

Given the differences between state laws, methods and types of forced sale property sales, you really do need to determine if the particular property is being auctioned by a private firm or a sale conducted to liquidate a creditor's position.

Joe Moore · Answer

Yes, in L.A. it probably true.  L.A. is in the seller's market phase.  The bank knows this and chose not to wait for financing when there are so many who have cash to close the deal.

Account Closed · Answer

Sheriff's sales are not the norm here.  Trustees sale is the usual foreclosure sale.  Absolutely you need cash to bid or have someone bid for you at trustee's sale.  Short sales are a totally different thing.  They aren't sold at auction.  Most lenders willing to accept a short sale offer will require cash offers.

Roy Oliphant · Answer

@AW Eilers

September 1, Sheriff's Sale on a house with no liens and the owner died with no heirs?  Sounds like a Tax Sale.  You will need to be prepared to ay for this the day of the auction.  Some counties expect you to pay immediately, some will give you a couple of hours to get a cashier's check.

Only cash only can buy at auction - Is this true ?

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