Auction.com / do it yourself foreclosure / need help with this

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Auction.com / do it yourself foreclosure / need help with this

Thomas Williamson
Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes

I've read a lot of the threads concerning Auction.com, and I've already e-mailed and called my real estate attorneys office for an answer to this, but I'm not sure when I'll hear back from the attorney. I thought I'd throw this out to the BP nation for an answer.

I'm preparing to go to the courthouse in the county I live in, in Georgia next week to bid on a couple of properties. They're listed on Auction.com, but the actual sale will be at the courthouse as normal. I've looked at the properties from the outside, and both appear to be vacant.

Here's what I've been told by the Auction.com folks. The sale is simply a "Trustee sale." Meaning it's not an REO property, so I'm responsible for going through with the actual foreclosure process myself (actually my attorney) if I'm the winning bidder.

I've got a title company lined up to do the title work beforehand on both properties, but my main concern is how long could the foreclosure process take, and how expensive will it be? I know a lot of that depends on the law and the attorney. Georgia by the way is a non-judicial foreclosure state. I'm trying to figure out if it's really worth the hassle to go through, but the MLS is drying up around here, so I'm looking at other alternatives. Any suggestions would be appreciated if anyone else has gone through this. Thanks in advance.

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  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    12y

    If the assets are on the schedule for Trustee auction there would not be much need to purchase the asset from Auction.com. Auction.com sounds like they would be selling the security instrument and note. The foreclosure process ends with the Trustee auction. So if you bought the loan from Auction.com, the sale is still scheduled and would more than likely complete where a winning bidder will get the home or it reverts back to the mortgagee. If you want the house, just go to auction and bid. Bare in mind, Auction.com makes no fees if you purchase at auction so they may be trying to drive sales from their site.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Hi Thomas,

    GA is actually both a judicial state and non-judicial state. Non-judicial is used most of the time. There needs to be a power of sale clause in the mortgage docs generally to go the non-judicial route.

    Judicial is used for legal disputes and title issues etc. for the most part here.

    The foreclosure process in GA is very simple. You send a letter stating the mortgage is due and in full and then from that time you advertise the legal notice of sale to be conducted at the courthouse 4 weeks.

    So the sale is held the first Tuesday of every month unless a holiday etc. If you are trying to start to advertise mid month then you just wait until next month to get the weeks in. The 4 weeks has to pass in the newspaper before you can do the sale the following month at the court steps.

    WHO is the seller of this vacant property?? Are you buying the note or is the property being sold to you from a direct owner and it's just vacant?? What kind of title is being provided with the sale? Quit claim, limited warranty, general warranty deed??

    Foreclosure options are based on what is in the mortgage documents and when it was originated. If you buy you need to look for code violations, back property taxes owed, water liens, EPA issues with the land. Are the properties vacant or is there stuff stored there??

    Personal property disposal laws in GA generally shows that anything over 500 in value you need to go through with eviction. If it's under 500 in value and then trash generally people just re-key without eviction.

    Having said all of this there is no legal advice given here and please consult your attorney for help.

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  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    12y

    I've been looking into a couple of these in my county and it looks like to me that they actually go through the legal process of notifying and foreclosing on their note and then just quit claim their interest to whoever buys it at auction.

    Makes sense from their perspective, saves them the cost of taking possession of the property, removing occupants, boarding up, winterizing.

    I've driven by the ones I'm interested in and they don't appear to be occupied. It makes sense that at least some of the people would move out when they get the foreclosure notice.

    My attorney's checking title on them before I bid.

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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    Thanks everyone for the quick responses, Joel great info as usual. Jeff I think you hit exactly what I was looking for as well. I couldn't figure out how far the bank actually went with the process since I had to continue with the foreclosure process, or at least that's what I was told by Auction.com. Dion, the attorney's office that handles a large majority of foreclosures (Mccalla Raymer) actually seems to be using Auction.com as a distribution site for lack of a better term. Mccalla Raymer list the upcoming foreclosures, but where it states opening bid amount, that's where they direct you to Auction.com, even though it's not an on line bid, it's at the courthouse.

    I can't really see how they're making money (Auction.com) that is, because you don't have to pay them anything to attend and bid on the property since it's at the courthouse. Joel if you can chime in on this, I'm assuming that like Jeff says, when you buy it at the courthouse, the heavy lifting has been done, I just take possession and take care of removing any property and people? Sound right? The good thing about these properties I'm interested in is they're vacant. Thanks for the help guys.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    I hope @Joel Owens @Dion DePaoli

    will chime again. what you stated makes no sense to me. If they are foreclosing, they are foreclosing and the auction would be the final step. Also, I can't see a Note auction being at the courthouse, so I totally do not understand the "you have to finish the foreclosure process" statement.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    I do not know why Mcalla Raymer Is using Auction.com

    In Georgia for a foreclosure sale you need CASH as the winning bidder. It is not like a auction where you get so many days as the winning bidder to obtain financing.

    Court house steps foreclosures and auction are 2 very, very different things in this state. You can hold an auction for anything but the FC sale has very specific actions to be followed or the whole sale can be reversed and be deemed invalid. Also the foreclosing party has so many days to seek a possible deficiency judgment against the party being foreclosed after the sale. The party being foreclosed can argue with the judge in some cases that the bank is selling the property under value and that the judgment being sought should be reduced or eliminated.

    They foreclose second liens all the time hoping someone doesn't check and bids on it. Just because it looks vacant they still might be storing items there or they have given keys to someone else. One way is to check and see if the outside meters are running or if they have forwarded mail already to another address with the post office.

    Thomas what are you trying to do with these properties if you purchase them?

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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    Joel my goal is to flip a few for cash for more buy and holds. I checked the meters on both homes and they're not running. The opening bids are so low for a courthouse auction, I was thinking these might be second mortgages as well. I'm going to continue the due diligence and reach out to my attorney. I want to make sure I understand this process thoroughly before putting cash into one of these properties. I'll keep updating the thread as I learn more. Thanks for the input.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    12y

    Thomas, at the steps the bid will be opened with the amounts due the first mortgagee, but it could be more if it's a low amount (that's another issues) but you'll know if a second is there as they will then enter their amount due, if you hear someone bidding in $15,263.87 above the beginning bid, that's a junior lien holder.

    Actually your costs should be minimal compared to a sale, you're nit required to get title insurance but you should for matters shown of record. Have no idea ht costs at the clerks office might be, you should be able to call and see what expenses are besides the bid amount.

    You might check too on redemption filings, usually an owner needs to state at some time prior to sale of the intent to redeem, sometimes they are required to post bond to do so, but not everywhere. If notice is required in GA, you can see if you'll be living with that issue and for how long.

    Next, you mentioned getting rid of those in possession. If a tenant is in there with a valid lease, they can have up to 6 months to vacate under federal law, there are requirements for the lease as to it being "valid" for this matter. Good luck :)

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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    Thanks Bill. I'm going to order title today and I'll check on the redemption filings as well. Thanks for the info.

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  • Rick Baggenstoss
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    12y

    Hi @Thomas Williamson - For what it's worth, I've purchased a property from auction.com. It was an online auction, but very similar ... a vacant foreclosure. It turned out well.

    The two issues others have pointed out that I was most concerned with (other than the property due diligence) were occupancy and clear title. Sounds like you're on both.

    Often they sell the house occupied. I suspect that's what they mean by finish the process.

    I've been to the Dekalb auction a number of times. I stopped when I realized the hedge funds were buying a lot of the properties for much more than I was willing to pay.

    Also, only half of the properties were really auctioned. The bank was bidding a much higher price than the bidders.

    Having said that, there were investors there picking up multiple properties at good prices. Once you learn it, I could see it being a reliable source of deals.

    Good luck!

    Rick

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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    Thanks Rick, nice to get some more local knowledge. I just spoke with a lady from McCalla Raymer. She cleared up the "finish the foreclosure" part for me. She said what she thinks the people at Auction.com were trying to say was if the property is occupied or there's stuff there then you have to deal with that. But as far as the actual foreclosure goes, once it's auctioned at the courthouse, that's it, it's a done deal. She said they'll hold the deed for a little while just to make sure no bankruptcies were filed by the previous owners etc. but outside of that, it's a done deal if you're the winning bidder at the courthouse. She also said she was not allowed to say whether this was a first or second mortgage auction, but since it's going through McCalla Raymer, I'm sure it's got to be for the first. But, that being said, I just ordered a full title search to be completed before the auction to be on the safe side. I'll let everyone know what happens after Tuesday, good luck Rick.

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  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    12y

    Some of this got a little confusing.

    The point is/was, Auction.com is NOT a Trustee Sale, that only occurs on the courthouse steps.

    Auction.com can only sell whatever asset the Seller has an interest in. If the Seller has not completed the foreclosure sale, then their interests are still in the mortgage. Auction.com can not sell you a deed to a home where the Seller does not have a deed to give. In the event you bid on an asset at Auction.com and it has a Trustee Sale date, in most cases the foreclosure process should be fairly seasoned and on the path to completing the foreclosure process is setup to finish the action. In most cases, the expenses for such will have already been allocated to the Seller. So while you would have to "finish" the Trustee Sale it is really already setup to finish itself and costs would be minimal for the legal process. Other fees, liens and such may apply.

    I think the point to all that was, the OP didn't seem to want to acquire the loan nor in this case does it seem like he should. Simply go to the Trustee Sale with proper due diligence in hand or in head and make you bids. Auction.com has nothing to do with the Trustee sale. In the event the asset doesn't sell at Trustee sale, then the mortgagee who becomes the deeded owner could list the property with Auction.com to sell the deed along with listing in MLS and any other marketing forum.

    As suggested, if you run a title ownership and encumbrance report, you and your attorney should be able to discern which lien is at the auction. You can purchase the deed from a second lien, you will just be subject to the first. Certainly a learning curve if you do not understand that. I think there are several threads here on BP about buying at Trustee auction and about purchasing second liens at auction versus first.

    When buying at the courthouse you should also understand the eviction laws, which perhaps your attorney can review with you. Protecting Tenants at Foreclosure Act of 2009 has provisions requiring notice of 90 days before starting an eviction for the initial successor in interest to the property. So no matter what, a tenant in the property is entitle to 90 days of occupancy post foreclosure sale and notice. If there is an existing lease/rental agreement you must honor that lease provided it is an arm's length agreement from tenant to old borrower and the rental amount is not substantially less than fair market rent. There is no allowance in the rule which allows a new owner to do anything less than honor entire remaining lease term. So, if they executed a lease 2 months ago for 12 months, you are stuck with that tenant for 10 more months, this can not be circumvented and there is no 6 month rule. If there is no bona fide lease, which the tenant is obligated to share with you, you will treat said tenant as a month to month lease until the 90 days have passed. They still will need to pay you fair market rent. A tenant can give possession back and move or they can enter into a new lease agreement with the new owner at any time. You just can't ask them to leave prior to the 90 day mark so if you take over and they do not pay your rent, you will still have to wait to process the eviction. State and local eviction laws and moratoriums do override the PTFA, so state and local laws will prevail provided they provide a minimum protection similar to the federal law.

    In Georgia there is no statutory right of redemption for loans that are not classified as high cost loans (high cost loans are afforded redemption but I forget how long). There is a borrower right to cure the default but that must be exercised 5 days prior to sale. All trustee sales are final in Georgia.



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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    Wow, thanks Dion great info. I don't know why the law firm handling this directs people to Auction.com either. It seemed to really muddy the waters for what should have been a normal sell at the courthouse. Interesting.

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  • Rick Baggenstoss
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    12y

    I have a hunch auction.com handles some of the courthouse auctions for the banks because they market the 'event'. In other words, auction.com offers a better chance the property will be sold to a bidder higher than the bank.

    The lawyers handling some auctions barely make their presence known, the properties are uttered, the preamble read, and property sold in some random order. Unless you are bidding thru a team or only tracking a single property, it's hard to deal with the lawyers but probably cheaper.

    Again, just a theory.

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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    Got the title report back on the property I'm interested in. Everything looks good, no issues. So, hopefully I'll be the only bidder or at least the highest on Tuesday. This has been a great education so far.

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  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    12y
    Originally posted by Thomas Williamson:
    Got the title report back on the property I'm interested in. Everything looks good, no issues. So, hopefully I'll be the only bidder or at least the highest on Tuesday. This has been a great education so far.

    How much did you pay for the "full title report"? If you are the only bidder, you probably missed something. IMO, you are not ready to bid at foreclosure sales.

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  • Account Closed
    Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
    12y

    Thomas,

    Based on my observation, Auction.com typically has very low opening/starting bids. They typically hold their auctions at a convention center in my area. However, I saw them held trustee sales for the first time at the courthouse steps in my area around April of this year. Before that, they normally showed up at the courthouse steps to pass out their flyers.

    To echo what John Rooster said, a title report is just a title report. You have to know how to do your own title search, know what to look for, and know what they mean. Hopefully, this is a simple case where the owner bought it at the peak with only one loan, and the house has been vacated.

    Also, I've noticed that vacant properties in my area tend to get a slightly higher bid because the winning bidder doesn't have to worry about cash for key, or eviction, etc.

    Anyways, good luck.

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  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    12y

    Don't know about Missouri @Bill Gulley or Georgia but in Oregon the bank posts a minimum bid which is almost always a discount to what is owed. After all, the reason it is usually being foreclosed is that the owner couldn't get what is owed.

    Secondly, on redemption rights with a judicial sale in Oregon anyone could have bought those rights, so if you haven't made arrangements with the seller you will have to wait out that redemption period (180 days) while someone else sits on those rights. The owner of those rights can buy you out 5 mo down the road for what you paid and you lose your repair investments.

    What is done in Georgia is going to be specific to Georgia. You need an expert in foreclosure for your area only.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    12y

    I certainly agree that this matter is state specific.

    Then let me say generally, I'll point out the contradiction. Any rights held by an owner are restricted federally after a notice of foreclosure is made, an owner can't encumber a property that affects the foreclosure process, such as making a one year lease or selling a partial interest to the property, they may only sell the property that allows paying off the loan. Selling redemption rights is a partial right in ownership, a benefit held, it's much like an option to sell/buy at a later date. So, that is my thinking and basis, states may allow it, I don't know if there has ever been a challenge to this, I can see where it wouldn't be if it was common practice, but who knows....

    Again, I totally agree, these matters are state specific and folks need to get with local counsel. :)

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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    Thanks everyone for the new info. John the title report cost 160.00. I've checked everything that I can think to check. Taxes are good, no other liens or problems were discovered at the courthouse, and I've found where the previous owner is now living. If there's a claim against the home, would that not have to be filed at the courthouse? The report also stated that there were no liens or judgments against the previous owner. There is only one mortgage showing for the property as well. Is there somewhere else I should look, or something else I should look for at the courthouse? Thanks for all the input, It's very useful.

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  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    12y
    Originally posted by Thomas Williamson:
    Thanks everyone for the new info. John the title report cost 160.00.

    If you paid $160.00 then you most likely have something you can rely on. Many people get a free or cheap owner and encumbrance title report and think they have everything they need to know. But you still need to be able to read between the lines, and hence I still would not advise you bidding on the property unless others show up to bid on it as well. If you have money in the bank and are looking for a buy and hold investment, or fix and flip, then going to the auction and just outbidding the other guys by $100 is not the worst idea in the world. But if you are looking to wholesale the purchase to someone else, then you are going to be disappointed. I take it you know there is equity in the property because of the Deed of Trust information, and that you are just not hoping for a deficiency bid, is that correct? It is unusual for a vacant foreclosure to have equity, but it does happen, but most likely there is a BK filing or the sale is continued shortly before the sale, because some other investor contacted the owner. Disclaimer: I have no idea what the post sale redemption rights are in GE.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    12y

    Another issue could be workmen's and material liens, check your state law to see if they survive. Claims must be filled within a time frame, like 90 or 120 days. They can pop up after a search and be made of record, it's irrelevant who the owner is as it's a lien on the property. If the owner has been out over the term or from the date notice was given the chance or risk drops that work was authorized or that the owner made improvements, but it can happen when an owner tries to improve things to sell the property. Title insurance won't cover items not made of public record. Just an issue to check on. :)

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  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    12y

    Have seen these rights go for as much as 40k @Bill Gulley. When I bought my foreclosure a group claimed to have the rights and offered them to me for 17k. Buying owners rights is their business. I chose to wait it out. Think there is lower hanging fruit for them, at least that is my hope.

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  • Thomas Williamson
    OP
    Investor · atlanta , GA · Member since 2012 · 287 posts · 148 votes
    12y

    We did some pretty thorough research for a property and decided on this one. We checked the comps, went to the house, looked in the windows, made sure meters weren't running, and there's no recent improvements that we can see from the outside. We've been buying buy and holds for over three years, and recently bought our first M/F (4-plex) in July. We decided to flip a few for cash, but the MLS has dried up around here, J Scott will back that up. Mechanics liens can be placed on property when work isn't paid for in Georgia, and a mechanics lien is pretty broad here. Fortunately none have shown up. We have our max bid set, and that's all the cash we're taking to the auction, if we get it at or below that price, great. If we don't, no big deal, we'll keep looking. There's equity in the property, only if it's bought right though. I'm not really getting my hopes up, I've been to these auctions before (several years ago when we first started) and didn't buy, even though I had the cash. Others were bidding up the prices way too much. Our company grew very fast, we're just at a point now where I want to raise more capital. Thanks again.

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  • Rick Baggenstoss
    Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    12y

    @John Rooster what skills and knowledge are required to bid a foreclosure auction in Georgia?

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