I received a notification from auction.com about a property in my area that is currently up for auction (ending 11/10). I'm not planning to bid on it because we are novice investors. Just trying to understand the process for future reference and learn as much as I can.
The property failed to sell on the courthouse steps in Dec. 2013, and is now listed on HomeSteps.com for $159K, which seems to be right around market value.
The starting bid on auction.com is $30K, which is ridiculously low for the home and the location (nice neighborhood, great school district and area, and just from the outside and peeking in the windows, the home appears to be in good shape). There is a reserve. Current bid is $60K.
My questions are:
- Why is the starting bid so low? Is it just to entice buyers to start the bidding process in hopes that they'll get caught up in a bidding war/frenzy? Is it typical for bids to start so far below market value?
- Considering it's a HomeSteps property, are liens still a potential issue just as they would be in a courthouse/trustee auction?
Any information would be greatly appreciated!
Yes, it starts a "bidding frenzy"! Sometimes that tactic is used at open houses for retail sales too. Just as w/any house, clear title has to be issued.The title company will run the search. I hope this helps.
You have to be very careful and read the terms of the auction.com properties. Quite often they will only provide a QCD meaning you could inherit all liens and other encumbrances with the property. It is advisable to do a title search before you bid on the property. However, given it is FM property, they generally wipe out all liens prior to sale, but not always.
And yes, the bids start low as to create a frenzy, and the seller actually will submit their own bids to inflate the prices higher.
They are offering a Special Warranty Deed on the property. It's at $80K now with the reserve not met - not sure it's quite at frenzy level yet, but there is still a day and a half to go on the auction. I was wondering if Freddie Mac sales wiped out liens. I guess a title search is the best way to know for sure.
I had heard that the seller submits their own bids to inflate prices, so that it's possible to win the auction without having the highest bid. I also have seen on other posts that you can still win the auction if your bid doesn't meet the reserve but was the highest (non-seller) bid, but was wondering if that holds true for Freddie Mac properties.
It's interesting to watch and learn. At some point, we would like to buy properties at auction but not until we have much more experience and education under our belt.
you should get a clear title.. auction.com always starts low and final bids (unless they pass the reserve) are subject to bank approval.
don't overlook working with a great Realtor, that's investor friendly & honest, such as myself! Wholesale properties are becoming more & more "precious" If you want to try the MO market, we still have it going on!!!
I always monitor auction.com for potential deals. I've never bid yet. Like Chad mentioned in many cases there is a QCD. Keep that in mind. Also if it is not a vacant property you have to deal with the current occupants. The bidding may usually start very low, but if the reserve is not met, the seller may not accept the bids. If the property is really good, the chances are that it will get bid up very close to fair market value. Also, in most cases you will not be able to see the property, so you have no idea what you're getting into. Cannot estimate repairs, rehabs etc.
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