Questions about foreclosure auctions. King County, WA.

7 Replies

Hello!

I'm looking to go to my first foreclosure auction soon in King County, WA. I have a few questions on the process of the whole thing. Here is an real life example for an upcoming auction: 

There's a house in my area that is going for auction this month. This house from the outside I can tell has been well maintained and you can even tell they've added on to it. In my market, it's easily worth at least $350K. Opening bid is $260,000. But I can see the mortgage owed is for $276,827, so I'm assuming the lender, Wells Fargo, won't take anything less than that. Also, this house and same owner, has had 3 notices of trustee sales in the last 5 years, but within a year there's been "release of lis pendens/notice", which I'm assuming means they paid their default amount to Wells Fargo. I also noticed in the last notice of trustee sale, the trustee name changed from Northwest Trustee Services LLC to Aztec Foreclosure Corp of Washington.

Pretending I'm ready to buy this place, my questions are:

Is it possible for me to contact the lender several days before the auction and try to buy it now?

If I did end up going to the auction, willing to pay up to $300K, do I just get a cashiers check in that amount, paid to "Aztec Foreclosure Corp of Washington" or who do I make it out to? What happens if I win the bid at $295K but only have the check for 300K?

What's the process after, if I am the highest bid? When is my name officially on title?

These are all probably real beginner questions, I apologize for that, but your help is greatly appreciated!

Lately the homes on the court room steps are going close to retail and sometimes more.  There are a lot of eyes looking at the same property.

You will make the check out the the beneficial or the Trustee, the company doing the auction will tell you,  and usually you have till 5 PM the next day to come up with the funds.

Most auctions will require you to put down a cashier check around $10,000 when you win the bid and pay the balance within 24 hours. I use to keep cashier checks made out to cash, and then endorse them when I won the bid.

The trustee will issue a "Trustee Deed"  to you when you win the bid.

Originally posted by @Dennis Dahlberg :

Lately the homes on the court room steps are going close to retail and sometimes more.  There are a lot of eyes looking at the same property.

You will make the check out the the beneficial or the Trustee, the company doing the auction will tell you,  and usually you have till 5 PM the next day to come up with the funds.

Most auctions will require you to put down a cashier check around $10,000 when you win the bid and pay the balance within 24 hours. I use to keep cashier checks made out to cash, and then endorse them when I won the bid.

The trustee will issue a "Trustee Deed"  to you when you win the bid.

If these properties are selling for close to retail as you say how do investors make any money on these deals? The numbers don't add up as far as I can tell on a LOT of these auction homes. 

Most people are purchasing for rentals...with the hope of hyperinflation.

The flippers i meet have the following situations.

  1. They are licensed real estate agents
  2. They are taking on projects that require major rehab work.
  3. Or the are doing wholesale work.  

The days of buying at the court room steps and making moola past by a few years ago. That's why I became the opposite, I became the lender.

I suggest before you do anything you get your RE License.  

Originally posted by @John Koopman :

Hello!

I'm looking to go to my first foreclosure auction soon in King County, WA. I have a few questions on the process of the whole thing. Here is an real life example for an upcoming auction: 

There's a house in my area that is going for auction this month. This house from the outside I can tell has been well maintained and you can even tell they've added on to it. In my market, it's easily worth at least $350K. Opening bid is $260,000. But I can see the mortgage owed is for $276,827, so I'm assuming the lender, Wells Fargo, won't take anything less than that. Also, this house and same owner, has had 3 notices of trustee sales in the last 5 years, but within a year there's been "release of lis pendens/notice", which I'm assuming means they paid their default amount to Wells Fargo. I also noticed in the last notice of trustee sale, the trustee name changed from Northwest Trustee Services LLC to Aztec Foreclosure Corp of Washington.

Pretending I'm ready to buy this place, my questions are:

Is it possible for me to contact the lender several days before the auction and try to buy it now?

If I did end up going to the auction, willing to pay up to $300K, do I just get a cashiers check in that amount, paid to "Aztec Foreclosure Corp of Washington" or who do I make it out to? What happens if I win the bid at $295K but only have the check for 300K?

What's the process after, if I am the highest bid? When is my name officially on title?

These are all probably real beginner questions, I apologize for that, but your help is greatly appreciated!

Your Comment:"This house from the outside I can tell has been well maintained" Don't kid yourself. When people can't afford to make their mortgage payment they aren't making repairs either. Some people trash the house just before the auction.

Your Question: "Is it possible for me to contact the lender several days before the auction and try to buy it now?" No. It is still owned by the borrower. The lender can't sell it before the auction date.

You have to have funds with you. They verify funds before they allow you to bid. You call Aztec and ask what the policy is. Usually, you have a large Cashier's drawn on a local bank, with several $5,000 increment checks. They will eventually refund the difference.

They take your money on the spot and create a Special Warranty Deed at the auction. It usually gets recorded within a few days. If the homeowner hasn't filed bankruptcy just minutes before the auction, the property is yours. It they file bankruptcy you eventually get your money refunded.

If they are starting the bidding below what they are owed, the bank will bid up to the amount owed plus arrears, plus non-recorded loan modification amounts, plus legal fees. They want action - excitement - so people will bid. In theory (and law) the home owner is entitled to receive anything over what is owed to the bank plus legal fees. The bank does not get to keep excess funds.

Since it has been this route a few times, there is a possibility that this is an auction by the bankruptcy curt. That changes the rules somewhat. Anything over the amount owed to the bank may end up going into the estate of the borrower to be disbursed as seen fit by the bankruptcy trustee.

These rules apply to Washington State only. Other states do things entirely differently.

@John Koopman I'm not familiar with how trustee sales go in WA so I don't want to give you any bad advice. If you're serious about this, I suggest going to the next trustee sale just to get the experience before you go for the real thing. You'll get to see how it all works for yourself. If you're nice about it, investors and auctioneers should be willing to answer your questions. Keep in mind that there will probably be much more experienced investors than you who will know what they're doing and will outbid you on a good deal. If no one is bidding against you, it might be a sign that they know something that you don't. I also suggest that if you go to bid, have a maximum bid amount in mind before the bidding starts and don't go over it.

@Account Closed Something weird is going on with this house and the owners though. There's been 3 notice of trustee sales in the last 5 years. The outside of the house is nicer than the rest of the houses on the street. Also, owners have nice vehicles and spend extra on them like new chrome rims, fully tinted windows, and other dumb accessory stuff. I've Facebook stalked the owners lol, and they go on vacation a lot. My guess is that they are morons and forget to pay their mortgage?? Who knows, this is just a local example for the topic though, not that important. Appreciate the advice though!
@Dennis Dahlberg yeah I notice when REO's pop up on the MLS around here, they are going for retail. Which I'm assuming they went at auction, but nobody bid high enough or bid at all, so then the lender listed it. I've also noticed that some REO properties end up with HUD and then auctioned on hudhomestore dot com. I actually just sold a duplex in this situation a few months ago (As a buyers RE broker). But curious as to how and why HUD owns the home. But I did just find out about a home in my area that went at auction several months ago for $287K. An agent bought it and flipped it and has recently listed it at $500K. Talking to the agent, he said he had no competition at the auction. So that was good to hear that getting places like this at an auction is still possible (even though I'm sure it's rare), cuz this would've been a no brainer at $287K. I wish I was savvy with the foreclosure and auction process back then. Thank you for the advice!