Updated about 6 years ago on .
Why are Some Foreclosure Auction Sales so Cheap?
Why are Some Foreclosure Auction Sales so Cheap?
As you look through the previous day’s foreclosure auction results you see some eye-popping sale prices. Some properties you know to be worth $300,000 or more have sold for $50,000, $10,000, even $100! How can this be? Surely something is incorrect, or you are being tricked into buying something right? Well no, not really, you just need a primer on foreclosure auction results.
Let's start with an example foreclosure property. A property with a market value of $300,000 which is located in a community with an association that charges a monthly maintenance fee. This property also has two mortgages, one for $200,0000 and a second one with an equity line of $20,000. Mortgage #1 is held by a small bank that was prolific during the Great Recession and was packaged up and sold over and over again to other banks and investment firms. Mortgage #2 is an equity line of credit known as a HELOC (home equity line of credit) from Wells Fargo that is currently maxed out.
Tragedy strikes, the owner loses their only source of income and no longer pays their mortgages or HOA monthly dues. Somehow this homeowner manages to get someone to replace the roof and they place a mechanics lien on the property as they have not been paid their $2,500 balance. The HOA is also not being paid their monthly maintenance fee and they place an $8,500 lien on the property for what they are due. This property has a title full of encumbrances, mortgages, HOA liens and a mechanics lien.
The $40,000 Foreclosure Auction Winning Bid ScenarioWithin 180 days, mortgage #2 files a notice of Lis Pendens, the first step in the foreclosure process. The Big Bank that is well run has their battle tested and honed foreclosure machine firing on all pistons. The homeowner is distraught and does not seek legal help and does not respond to the foreclosure lawsuit. The Big Bank fast tracks the foreclosure process and they quickly get a final judgement of principal plus legal fees for a total of $34,800. The property goes to auction and an experienced investor armed with our “HOA Foreclosure Play” strategy wins the bidding at $40,0000. The investor then follows our Foreclosure Eviction strategy and our homeowner leaves under win-win terms to rent elsewhere...(CLICK LINK ABOVE FOR FULL BLOG)