Portland, OR · Member since 2012 · 21 posts · 1 vote
Earlier this summer I made an offer on a property in Surprise Az and have been waiting on lender's approval. My agent emailed me this weekend telling me the house is scheduled for trustee sale on Friday and he has a friend that works at trustee sales who could place a bid for me and his fee is $1500. The agent also says that I will still owe him his 3% broker fee. He thinks I could potentially get the house for less than i offered on the short sale.
I'm new at this and though I should post here and see what is the norm with out of states bidders and whether the agent is still entitled to his 3%.
Am I missing something? Why can't the agent place the bid for the buyer? Why does the buyer need to add an additional cost by hiring another party to place the bid?
It seems to me if you are paying an agent to represent you, the agent can represent you at the trustee sale.
It depends on the contract you have with your listing agent. If you have an exclusive buyer's contract that specifies that the agent is entitled to a commission on anything you buy (or anything you buy that was presented to you from that agent), then yes, you probably will owe the commission.
Depending on how the contract is written, this may be a grey area, but it may not be worth the fight on your end if you need the agent to help you purchase at auction.
Here's what I would do:
1. Negotiate the commission with the agent. Since you will be paying it (as opposed to the seller), see how much less the agent is will to accept. While the agent doesn't have to take less than what was agreed to in the contract, if this is their only shot of getting paid, they will probably be willing to accept less as opposed to nothing.
2. Once you have that lower commission percentage agreed to, subtract that amount plus the $1500 from your maximum purchase price -- this will be your maximum bid amount at the auction.
3. Let your agent handle your auction bid and ensure they know what your maximum bid is.
Am I missing something? Why can't the agent place the bid for the buyer? Why does the buyer need to add an additional cost by hiring another party to place the bid?
It seems to me if you are paying an agent to represent you, the agent can represent you at the trustee sale.
It seems to me if you are paying an agent to represent you, the agent can represent you at the trustee sale.
I was thinking the same thing...
My guess is that the agent is just too lazy to do this, and would rather outsource it, costing the buyer both commission and the fee to the auction bidder.
Unfortunately, depending on how the buyer agency contract is written, the agent may have the right to a commission at this point, regardless of how the property is purchased (assuming it is purchased).
Also, if you are actually thinking about doing this, make sure this $1500 fee is only paid if you are winning bidder. The way you wrote it here could be taken as he gets paid just for being there and placing the bid for you, not the outcome like your agent's commission. It also says you just made an offer this summer, nothing about inspections completed. If you buy it at a trustee's sale, you own it whether or not it's falling down a day later, no guarantees, and usually must pay in full within a certain time frame, no leniency given for being unable to obtain financing within that time. If you have a line of credit lined up and know you can write a check for the whole amount when necessary, then it's an option. Otherwise, in my opinion, just too risky.
I agree with everything thus far, but why would you need to pay someone $1500 to bid for you. Also, the fact that your agent would suggest this, make me leery of the guy. I am an agent, and if this situation occurred, I would ask you if you wanted my help, for a reduced %, then I would help do the research, etc. If you have a buyers agreement with the agent, it probably would not apply to this.
But, do your research-get a title search report, about $100, do physical inspections and find the procedures to bid. If it is online bidding, you probably have to have a deposit placed, 24 hours or more, in advance, with balance due same day/24 hours.. I assume you are buying all cash, you can't do this getting a traditional loan.
Putting aside the issues of commissions and using a proxy bidder, trustee's sales are full of risks and, IMO, not for inexperienced buyers. You will be buying without title insurance. Do you have at least a cursory understanding of AZ foreclosure law? Have you seen and read the title report? Do you understand it sufficiently to ensure that you are buying via a senior lien and that there are no other liens affecting title? Are you aware of any pending issues with the seller/borrower, for example are they contentious about leaving the house? A short sale takes care of so many things that a trustee's sale does not. I would not let an agent guide me about buying at foreclosure sale. There's no risk in it for him and lots for you. Tread carefully.
There are a number of services that will bid for you at auction, and I'm not sure why the agent would be due anything at all if you bought there - a great agent would get the trustees sale postponed & get you the deal without any competition. From what I've heard locally, many trustees sale properties are selling too high anyway in the Phoenix market. Unless this place is really hogged out, I wouldn't expect any discount over the previously negotiated short-sale price. Old short sales that are closing currently are the only thing keeping a lid on pricing in Phoenix right now. They're the "comps" holding appraisals down.
Unless you have an exclusive contract with the agent, I'd find my own bidding service & cut the agent out completely, they aren't adding any value to the transaction.
It depends on the contract you have with your listing agent. If you have an exclusive buyer's contract that specifies that the agent is entitled to a commission on anything you buy (or anything you buy that was presented to you from that agent), then yes, you probably will owe the commission.
Depending on how the contract is written, this may be a grey area, but it may not be worth the fight on your end if you need the agent to help you purchase at auction.
Here's what I would do:
1. Negotiate the commission with the agent. Since you will be paying it (as opposed to the seller), see how much less the agent is will to accept. While the agent doesn't have to take less than what was agreed to in the contract, if this is their only shot of getting paid, they will probably be willing to accept less as opposed to nothing.
2. Once you have that lower commission percentage agreed to, subtract that amount plus the $1500 from your maximum purchase price -- this will be your maximum bid amount at the auction.
3. Let your agent handle your auction bid and ensure they know what your maximum bid is.
In phoenixit would be extremely unusual for an agent to bid at trustees auction. It's a cash-only sale with no right of inspection, and no warranty. An agent isn't needed and doesn't really add any value to the transaction. Anyone with cash can show up and buy.
3. Let your agent handle your auction bid and ensure they know what your maximum bid is.
In phoenixit would be extremely unusual for an agent to bid at trustees auction. It's a cash-only sale with no right of inspection, and no warranty. An agent isn't needed and doesn't really add any value to the transaction. Anyone with cash can show up and buy.
What I meant was to let the agent handle arranging the bidding with the on-site bidder, since the agent apparently knew someone. I agree that using a proxy isn't necessary, but it sounds like the buyer/investor isn't local to the property or for some reason doesn't want to do the bidding himself.
inspection was done earlier this summer, needs new carpet, paint and termite treatment. The house was built in 2003, treated for termites in 2010, the inspector noted new termite activity and said he didn't see any damage, but would recommend termite treatment and contract for annual checks and necessary treatment.
Both the agent and I know I got a great deal on this house, similar floor plan and square footage house in the community was just sold for 25% more of what i got this house under contract for. Surprise address, Peoria school district, gated community, close to 101, doesn't need much work.
Here is what made me mad. The agent wanted to know if the trustee sale is not postponed, would i bid on it in auction and if not he is interested in this house and wants to bid on it himself. But if i bid on it he won't compete against me.
As my agent, I expect him to do his best to make sure i get it under my current contract not to be interested in bidding on a property i've already got under contract. This is a total conflict of interest!!!! Why would he work hard to make sure it doesn't get auctioned off if he himself wants to bid on it????
And one more thing, no liens, 2011 taxes all paid.
If the lender decides to foreclose the property, there is nothing your agent can do. There is nothing the listing agent can do. Your agent has absolutely no influence in getting the trustee sale postponed.
Since this is a trustee sale, the winning bidder must pay cash on the spot. Who is the one that will front the money for the purchase of the property?
If the property has shot up 25% in value, I doubt you or your agent will be the winning bidder. Trustee sale has been very competitive lately. Remember that the trustee sale is beyond your agent's and the listing agent's control. Your agent disclosed to you upfront and gave you the option of buying it first. If you don't buy it, he will. Basically, he put your interest first. I don't think you should fault your agent for it.
If you decide to go forward and bid on the property, the $1,500 for the proxy bidder should come out of your agent's 3% commission because the proxy bidder is doing his job. Also, there will be cash for key and title insurance that you will have to pay if you win. You will also have to pay for 9 months worth of property tax if it hasn't been paid this year.
Before you even consider having your agent and the proxy bidder bid on your behalf, go back and read what K. Marie Poe said above. If it were me, I'd let it go if I cannot acquire it through a short sale. Trustee sale is not for the inexperience.
If the lender decides to foreclose the property, there is nothing your agent can do. There is nothing the listing agent can do. Your agent has absolutely no influence in getting the trustee sale postponed.
I'm a big fan of blaming the agent if *anything* goes wrong in a transaction, but I agree with the above. Despite the best efforts of a great agent, if a lender decides to move forward with a foreclosure, there's not much anyone can do except beg and plead and hope the lender changes its mind.
It doesn't happen too often, but sometimes a lender will just decide they'd rather foreclose than respond to a short sale offer, even if the bank has been sitting on the offer for several months -- though I guess that's sort of their way of making the decision that they don't want to accept the offer.
Lisa Goodwin I suggest putting your best intentions towards getting the short sale closed. It is unlikely that the property will be a good deal at trustee's sale. If you do bid at sale realize there are risks, and that it requires cash at time of sale.
The house was foreclosed in 2010 and then financed a few months later. The seller has been in the house for a little over two years now.
The shortsale contract $$ is slightly more that what the seller owes on the property which I think makes a great shortsale, the lender's loss is zero if they postpone the Turstee sale.
They may be able to get more than what's owed on the property at the auction.
Lisa,
IF you're that close to the lender's pay off-maybe raise your price enough so that it is not a short sale. Get the payoff amount, and close. With a full pay off, the bank will be more willing to postpone.
inspection was done earlier this summer, needs new carpet, paint and termite treatment. The house was built in 2003, treated for termites in 2010, the inspector noted new termite activity and said he didn't see any damage, but would recommend termite treatment and contract for annual checks and necessary treatment.
Both the agent and I know I got a great deal on this house, similar floor plan and square footage house in the community was just sold for 25% more of what i got this house under contract for. Surprise address, Peoria school district, gated community, close to 101, doesn't need much work.
Here is what made me mad. The agent wanted to know if the trustee sale is not postponed, would i bid on it in auction and if not he is interested in this house and wants to bid on it himself. But if i bid on it he won't compete against me.
As my agent, I expect him to do his best to make sure i get it under my current contract not to be interested in bidding on a property i've already got under contract. This is a total conflict of interest!!!! Why would he work hard to make sure it doesn't get auctioned off if he himself wants to bid on it????
And one more thing, no liens, 2011 taxes all paid.
I'm beyond mad!!!!!
Is this the same property in Surprise that you had a lender acceptance on, back in July?
The shortsale contract $$ is slightly more that what the seller owes on the property which I think makes a great shortsale, the lender's loss is zero if they postpone the Turstee sale.
So, it's only a short sale because the commissions, concessions and closing costs are dropping the seller's net to less than the payoff?
If so, can you raise your offer to cover the commissions, concessions and closing costs to a point where the loan payoff is covered?
If you do that, it's not a short sale and you just buy the property outright tomorrow...
Lisa Goodwin I'm confused what's going on with your offer. How "short" is it? If you can get the lender paid in full and pay everything else, is it still a good deal? Do you have a slam dunk in front of you but are sticking to your original offer?
If you try to buy it at trustee's sale, you may not prevail. And if you do, you would have the cost and hassle of dealing with getting the owners out of the house.
Like J Scott says, if you can pay off the lender and all other closing costs, the deal becomes just between you and the seller, and the lender is out of the deal tomorrow. The lender then has nothing to do but provide a payoff amount.
The house was foreclosed in 2010 and then financed a few months later. The seller has been in the house for a little over two years now.
The shortsale contract $$ is slightly more that what the seller owes on the property which I think makes a great shortsale, the lender's loss is zero if they postpone the Turstee sale.
They may be able to get more than what's owed on the property at the auction.
Based on the information you provided, if I were the listing agent, I would recommend the seller to file BK to stall the sale. I then mark up the price 20%-25% and sell it at FMV. This way, the owner is walking away with some money in their pocket. What happened to fiduciary to your seller? Not a very good listing agent they hired there in my opinion.
So, I'm still curious. You previously said the lender would come out paid in full with your offer, which it doesn't look like it will. Is the sale scheduled for tomorrow? Can you raise your offer, get the lender out of the picture, write a new contract and buy it before it goes to sale?