Incredible opportunity, or do I not understand what's happening?

22 Replies

I don't yet have the money/skill to pull this deal off. Still, I'm trying to observe what the market is doing. So through various web searches, I found a property that is going to be sold at foreclosure auction on Thursday, July 24. It seems like the sale price will be starting incredibly low for our area. The Bank has already submitted a bid for the amount due on the loan plus fees. I suspect that the Bank is simply trying to prevent the property being sold at less than owed, while adding the property to its own REO portfolio. There are other properties being foreclosed by the same bank for which the bank has not submitted bids in writing.

City: Denver
Original note info: $100k in 2003.  $40k outstanding.
Bank Bid: $43k ($2k deficiency)
Value (according to Zillow): $260k, seems appropriate for area.
1 bed/1 bath, 1100 sqft.

I understand that Zillow's estimates are not totally reliable, but even if it's 10% high, you're looking at a pretty good margin.

Am I about to watch this property get sold at an incredible discount? Should it be expected that this property will be shredded like chum by the sharks at auction?

What's going on here...and how do I become one of the sharks??!

If your value is close,And the foreclosing bank is the 1st mtg (not a second) the property won't go for anything near the mtg balance.  If this were the case though, it likely would have already been bought by someone prior to the auction.  My guess is this is a second mtg being foreclosed on, which means there is a first mortgage staying with the property.  When looking at auctions, partial information can be dangerous.

A vote for Wayne when I get a reload. Have you dug into the foreclosure file to see if "Original note info: $100k in 2003. $40k outstanding..." is actually true? Sounds like a second, and seconds discount a lot because they have a lot to lose.

That info came directly from Denver's office of clerk and recorder, as did info regarding the bank's bid. I actually have a copy of the Bank's itemized bid in front of me. Am I wrong to think that the bank would bid an amount that puts the property into their REO portfolio clear of lien encumbrances?

I realize that Zillow's valuations are not considered reliable, but they do pull some property info directly from public records.  For instance: this property last sold in 1988 for $13,000.  (Pretty sure that was in Buffalo Bill's heyday.)

I also realize that some newbie threads get tiring with the same ol' questions.  I guess what I'm asking is how do I do further title/lien investigation?  ...or does it just come down to paying someone else to do that?

If the info is online from that county, you can find it through netronline.com, put in your city/state, and it will take you to the county sites.  Search the owner's name, and maybe the previous owner, to find mortgages/liens/judgments on the property.

andy,

I'm very new as well. I have have a question for you. Where did you find the listing for the foreclosure/auction listings? I'm in the Denver area and am not sure where else to look except on the mls?

In the end you, if you were going to actually bid, you would pull the O&E and find out what it actually listed. That's the only way to be sure. Renav put on a little auction course that get's you acquainted with the whole process.

I pull info on all the Denver auction properties each week (PM me if you want to get on that email list).  @Tom Spaeth  is correct that you should pull an O&E ($5) to get an idea of what liens are on the property.  From the records I can see, it does appear to have two mortgages although I do think it is the first that is foreclosing. The property has a history of getting to this point and then not going to auction, so it is quite possible it will get pulled before Thursday morning.

Auctions are a good opportunity to keep your eyes on. The public trustees office offers free classes on how to buy at auction, and you can go down and observe.

@Andy Thompson  call your favorite title company and request an O&E (ownership and encumbrances). It's a quickey title search that show who owes what. It'll cost you $5 and usually takes about half a day to turn around. If you need a title company send me a pm and I'll share my contact.

I know this, there are people with money that live and breath the Denver auction so I agree with @Anson Young  . I attended auction once. It's really interesting (at least it was to me). All the regulars know each other. I went in the height of the foreclosure cycle and there were probably 50 people in the room. Some were one and done (they attended to bid on a specific property).

Even if it's a second lien it might get bought if the first lien is in line to be foreclosed on.  The second position has the right to redeem the first so they get to make the bank whole. For example 2nd of $40K like you found then a 1st of $150K. Buy the 2nd and get the rights to the first and you get the property for $190K (40+150). Still a pretty good deal. A friend did that game on a couple of properties. They also negotiated and bought other liens on properties in foreclosure. This allows them to pay off the first and own the property.

Also the bank can not bid more than is owed. If it sells for more the difference goes to the owner. Another program that people use is they approach people in foreclosure and pay them for the property ahead of foreclosure. Colorado has a number of requirements for buying property from a seller that is in foreclosure. NOT a DIY using the stuff from the latest guru class unless you want a visit from the DA and Attorney General.

Thanks all!  So do you guys know if anyone on BP specializes in purchasing properties in at Denver auctions?  It seems like there is a lot of great info coming from folks who've looked into it and decided it may not fit their strategy, but I'm also curious to hear from folks who choose to swim in those waters.

@Micki M.  - Thanks for the perspective.  Do you have any resources for the strict requirements of purchasing during pre-foreclosure Colorado?  My google-fu came up short in finding the specific difficulty to which you allude.

Just wanted to say thank you to all the veterans who contributed to this thread.  I've learned a lot from it.

@Kate Horrell  be aware each state's foreclosure laws are different. What works in Co is not the same as Maryland. In fact the Colorado foreclosure process is rather unique from what I've been told. We have a public trustee which not many states use.

@Andy Thompson  start by reading the Attorney Generals info. When purchasing Colorado property in foreclosure for less than the value of the property it's called purchasing equity (aka equity skimming).  Colorado has a long list if folks who have really taken advantage of the system and uneducated people in foreclosure. Every market cycle the legislature makes more laws to protect the little guy. From a legal perspective, most real estate agents in Colorado will have no part of an equity purchase deal. The real estate commission has made it clear they risk losing their license by participating is such deals.

Originally posted by @Andy Thompson:

Thanks all!  So do you guys know if anyone on BP specializes in purchasing properties in at Denver auctions?  It seems like there is a lot of great info coming from folks who've looked into it and decided it may not fit their strategy, but I'm also curious to hear from folks who choose to swim in those waters.

@Micki M.  - Thanks for the perspective.  Do you have any resources for the strict requirements of purchasing during pre-foreclosure Colorado?  My google-fu came up short in finding the specific difficulty to which you allude.

I'm one of those who went to the auctions for 6-8 months to figure it out, know a handful of guys who are down there weekly, and quickly decided it was not for me.  You will be hard pressed to find a BP member down there, thats an old boys club, and they will hammer you hard when they realize you arent in their club, that you dont have the money to hang in there.  I've watched noobs get bid up $10k just for fun, I've watched collusion, I've watched deal trades... basically, I've watched a very dirty game go down.  They know after they bid up a newbie on a deal they werent even interested in, they wont see that guy for a year, if ever again.  After getting to know a handful, save a few, I realized these are not people I would want do business with regardless.

Anson Young, Real Estate Agent in CO (#14161n)
303-475-9999

I hear what the pros are saying about auctions, however that kind of crap goes down in every aspect of this business, and I'm not in favor of letting those who play dirty tricks win. If you educate yourself and can go in showing you know what you're doing, there's no reason you can't take advantage of opportunities at auction and elsewhere.

BP'ers, doing real estate right one deal at a time... am I right?

Originally posted by @Anson Young:
Originally posted by @Andy Thompson:

...

I'm one of those who went to the auctions for 6-8 months to figure it out, know a handful of guys who are down there weekly, and quickly decided it was not for me.  You will be hard pressed to find a BP member down there, thats an old boys club, and they will hammer you hard when they realize you arent in their club, that you dont have the money to hang in there.  I've watched noobs get bid up $10k just for fun, I've watched collusion, I've watched deal trades... basically, I've watched a very dirty game go down.  They know after they bid up a newbie on a deal they werent even interested in, they wont see that guy for a year, if ever again.  After getting to know a handful, save a few, I realized these are not people I would want do business with regardless.

It would be interesting to know if the Colorado Attorney General is keeping an eye on them. What you describe is very similar to activity elsewhere, and in other states the practices implemented by some bidders/companies have been determined to be 'against public policy'. That was the case in my county where collusion and other practices led the to the NC AG office stepping in.

Reference: http://www.ncdoj.gov/News-and-Alerts/News-Releases-and-Advisories/Press-Releases/AG-Cooper-unravels-Triangle-real-estate-bid-riggin.aspx

The state Real Estate Commission permantently revoked the licenses of those brokers involved. Some were Realtors... you know, those who claim to be 'held to a higher standard'.

It would be interesting to see how those who collude handle an independent hedge fund buyer...

Originally posted by @Chris Martin:
Originally posted by @Anson Young:
Originally posted by @Andy Thompson:

...

I'm one of those who went to the auctions for 6-8 months to figure it out, know a handful of guys who are down there weekly, and quickly decided it was not for me.  You will be hard pressed to find a BP member down there, thats an old boys club, and they will hammer you hard when they realize you arent in their club, that you dont have the money to hang in there.  I've watched noobs get bid up $10k just for fun, I've watched collusion, I've watched deal trades... basically, I've watched a very dirty game go down.  They know after they bid up a newbie on a deal they werent even interested in, they wont see that guy for a year, if ever again.  After getting to know a handful, save a few, I realized these are not people I would want do business with regardless.

It would be interesting to know if the Colorado Attorney General is keeping an eye on them. What you describe is very similar to activity elsewhere, and in other states the practices implemented by some bidders/companies have been determined to be 'against public policy'. That was the case in my county where collusion and other practices led the to the NC AG office stepping in.

Reference: http://www.ncdoj.gov/News-and-Alerts/News-Releases-and-Advisories/Press-Releases/AG-Cooper-unravels-Triangle-real-estate-bid-riggin.aspx

The state Real Estate Commission permantently revoked the licenses of those brokers involved. Some were Realtors... you know, those who claim to be 'held to a higher standard'.

It would be interesting to see how those who collude handle an independent hedge fund buyer...

They cracked down on a lot of this, but they really just cracked down on communication inside the room.  Texts/emails still were flying back and forth from that point on though, so it didnt do too much.  There are maybe 3-4 deals at auction in Denver each week, the rest are overpriced.  Pretty much why we havnt seen any hedge funds come through town, in my opinion.

Anson Young, Real Estate Agent in CO (#14161n)
303-475-9999

@Anson Young  

Aw crap, your guys figured out the texting thing too.  What about the "which side of my face I tap my pen on"? (right side I want it, left side you take it)

Our auctions are online now, so the "boys" can just use speaker phones in their office.

Originally posted by @Wayne Brooks:

@Anson Young 

Aw crap, your guys figured out the texting thing too.  What about the "which side of my face I tap my pen on"? (right side I want it, left side you take it)

Wouldnt surprise me, honestly...  They cant stop full on baseball style signals... can they?  Can they????

Anson Young, Real Estate Agent in CO (#14161n)
303-475-9999

@Mickie McNie, thank you for the info!

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