I was the highest (not winning) bidder on an online auction. Homesearch.com called the next day and said that my bid was "waay off the reserve price", so it must be forwarded to the bank for review. The representative wanted to know if this was my "final and best" offer. I said that I'll let them know tomorrow, after talking with my realtor and possibly an attorney. She said ok.
The auction did seem a bit suspicious to me...it seemed like I was the only bidder (besides what seemed like straw bids from the auction house). Also, as the time between my bids became longer (I was reaching my pre-determined limit), the bid increment dropped from $7500 to $2500. Seemed like they were trying to get me to press that button one more time!
Anyway, I'd like some opinions about what to do. Should I stand on my original price? Should I offer a few thousand more? It's a potentially very nice home, but needs a lot of work. If I give them much more, there is not a lot of room for profit on a flip.
Has anyone stood on their original bid and had it accepted? Thanks.
Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
12y
In another thread recently someone pointed out that on most of these auction sites (and I think HomeSearch was one the called out specifically) if you read all the terms they do basically say they reserve the right to put in BS bids on their properties to drive up the price. So that very well could be what was happening to you.
Regardless of that issue... As far as paying more than your bid, that is up to you based on what you think it is worth. Sounds like you can't go up much and still make the profit you want. That sounds like the answer is stick with the original or go up a small amount that is still in the range you wanted to be in.
In my past experience I have had this situation always happen where I have no met the reserve but have been the high bidder. I have had them just give it to me since they wanted to be rid of it. I have had them come back and say they needed more and since it was a good deal I did go up a little but still within my MAO. I have also had some come back and said I didn't meet the minimum and give me a price they are willing to sell for and I declined as it was way more than I ever would have considered bidding.
All that is just to say that there is noway to really know what they will do. You might say "No my bid was my highest and best" and they give it to you or you might go up past where you should and they still might not feel it is enough.
Good luck but my advice is no deal is better than a crappy one, so don't overpay.
Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
12y
In another thread recently someone pointed out that on most of these auction sites (and I think HomeSearch was one the called out specifically) if you read all the terms they do basically say they reserve the right to put in BS bids on their properties to drive up the price. So that very well could be what was happening to you.
Regardless of that issue... As far as paying more than your bid, that is up to you based on what you think it is worth. Sounds like you can't go up much and still make the profit you want. That sounds like the answer is stick with the original or go up a small amount that is still in the range you wanted to be in.
In my past experience I have had this situation always happen where I have no met the reserve but have been the high bidder. I have had them just give it to me since they wanted to be rid of it. I have had them come back and say they needed more and since it was a good deal I did go up a little but still within my MAO. I have also had some come back and said I didn't meet the minimum and give me a price they are willing to sell for and I declined as it was way more than I ever would have considered bidding.
All that is just to say that there is noway to really know what they will do. You might say "No my bid was my highest and best" and they give it to you or you might go up past where you should and they still might not feel it is enough.
Good luck but my advice is no deal is better than a crappy one, so don't overpay.
Shaun, thanks for the advice. This confirms my thoughts....the online auctions are not true auctions, but a way to open a negotiation with the bank for an REO.
I agree that it is inadvisable to overpay, so I told them that I had made my best offer. We'll see what the reply is in a few days. If I get it, great. If not, I'll bid again or find another opportunity.
Ok, here's the update. The bank did accept our original bid. We completed the sales paperwork within the 72 hour window they allowed us and the bank ratified the contract the next day. So far, so good, right? Well.... I called the assigned closing agent (property is in Maryland, closing agent is in Georgia) and the interaction was very nice, very professional. However, the closer informed me that there "appears to be no recorded foreclosure deed" and no closing can occur until this has been taken care of. I ask "Does that mean that Homesearch.com just auctioned off a property that Nationstar Mortgage doesn't own yet?" The reply? "Yes." I ask "Any idea why they would do that?" The reply? "Your guess is as good as mine."
So, the closing agent has contacted the attorney handling the foreclosure to see if we can get a resolution to this matter. There might be a legal hitch, or possibly the legalities are resolved but just not recorded yet. I am hoping things will move forward, but I'm not holding my breath!
Fun and games in the foreclosure auction market....to be continued.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
Everyone thinks the auctions are rigged but know one has stepped forward with proof that is the case. I think what it is you have bidders making low ball offers and if the bank doesn't accept their offer, they think the auction is rig.
Realtor · Schaumburg, IL · Member since 2011 · 289 posts · 118 votes
12y
Kathy Lu I'm currently purchasing a property on Homesearch. I experienced the same thing with "straw bids" as you called them on auction.com as well as Homesearch. I do believe there is a fishy thing going on with that "getting you to click once more". The best way to counteract this, is by knowing your market well enough to understand what's too much. These properties are typically sold as is, where is so in my opinion, as an investor, I'm willing to pay the price I got to pay for the property I want, but wont pay retail if I must purchase through this avenue. It's an art, not a science I guess.
Anyways, about your current dilemma, purchasing property in this manner is not for everyone. You should do what your comfortable with. If you know your market and it's a good price, stick to it. My thought is this is exactly what they want you to do, they want to get in your head by asking if it's your best offer cause they want to get you to pay more. Besides, if this unit did not meet reserve, they do not have to sell the property. On one property I bought, the property went to auction four times before I won it and the reserve was never met on any of the auctions. I bid the first three times, stuck to my top number and stopped, I then watched the bid get raised right before the auction ended. Surprisingly enough, like clockwork, there was a bid every 2 second mark before the auction would end. Ridiculous bids by the way, was not worth what people thought it was worth. I watched this happen three times until I did the same thing on the fourth auction and won it although it did not meet reserve. Auction company must of got tired of watching people bow out cause they couldn't perform.
Don't get emotionally attached, if it's meant to be, then it's meant to be. Also, sometimes the brokers who gives these BPOs are totally wrong! So don't let the auction house push you around. Hopefully you know your market. Good luck!
Realtor · Schaumburg, IL · Member since 2011 · 289 posts · 118 votes
12y
Kathy Lu wrote my previous comment before reading the updated comments. Good job on sticking to your guns. That sucks about the hold up. That is something I learned to do when bidding on these properties, is to check the county records. Be prepared to not close if they can't rightfully sell it. Who knows what else they may pull out of their hat? Ugh... Good luck Kathy!
Fishers, IN · Member since 2014 · 4 posts · 2 votes
12y
@Kathy Lu@Christopher Leon hello ! Can you tell me status on your loans? I'm asking because my husband and I found a home we would love to fix up and wanted to place a direct offer. We were told we would have to go through the homesearch auction process. We read the term and conditions and it seamed the buyer had no rights what so ever and that homesearch could pull or change the rules of the game at any point. This did not sit well with us because we are just two people who are looking to move into a bigger home. Not investors not real state agents. Our realtor has not done nearly the amount of research I have. The home has been empty for 4 years. Had water in the basement and drywall was removed April 2014. They said that was 10k. After being in the home the air was very stale. I would like a remediation quote on the home an inspection and appraisal. I'm willing to pay For these services before I enter the auction just to make sure they can be fixed before I buy a money pit. Surprisingly we had a friend who is a home builder walk it with us and he said it was in amazing shape for being empty 4 years and encouraged us to make a move from his perspective. I had to go through greenlight and our rep is very professional and has tried every angle to help us overcome our auction anxiety by reaching out to the listing agent and asking the asset managers to go direct to no avail. Meanwhile I went to the courthouse and asked for records. There were over a million in liens against the home. It is listed for 307 starting auction price is 160k. Auction started yesterday. I found on the internet that the house was in a sheriffs sale in 2010. So that might explain the 3-4 million that was wiped clean but what about the outstanding liens to totaling over a million. Where did they come from? Gal at the courthouse said they were up to date as of July 10th. The greenlight rep said that the liens would be taken care of at escrow at closing and he was not aware of those liens or the mold removal. He said homesearch has never closed on a home without rectifying existing liens. If nationstar owns the property shouldn't they clear this stuff before putting it up for auction? This house was auctioned in March listed for 169k on 3/24. Sold for 169 on March 25 and was back on the market march 27 for 169k a month later went up to 291 and a month later landed at 307. Didn't the lien issue come up in march? So here are my burning questions if anyone can help me because I'm in love with this house but I've read all these horrible stories about nation-star and homesearch being a bad company and misleading people with paperwork not correct or incomplete or not disclosing all the details up front and asking for all this money and then when folks have a chance to read the paperwork they get after the auction they want to back out because the title wasn't cleared or whatever the case may be. I realize the risk you take on a property in foreclosure. What I wasn't banking on was the conflict of interest between nation star homesearch and greenlight. It seems like a huge conflict of interest and I don't know legally how this is going on. Would I be bidding on the home or one of the many liens? Will those liens indeed be cleared at closing so the house is free of baggage? Has anyone ever bought a home through home searched and lived to tell about it?
Any advice is welcomed before I drop a ton of money in an attorney to confirm something I'm already suspicious of? thank you in advance!
First, try to relax a little bit. I know it's easy to assume that REO companies are out to get you, but I really don't think that is the case. The banks actually want to sell these properties, it's just sometimes they are really bad at it! I'm a Realtor, so their antics don't scare me, I just find it frustrating. The bottom line is that Homesearch (actually Nationstar, the seller) must be able to pass clear, marketable title to you at settlement. This is stated clearly in the contract. If they can't, then the contract will be released and you will receive your deposit back. You will also have title insurance in case something was missed (very rare!). So, I think your Greenlight rep is correct on this point. You should choose your own settlement attorney (after you are the winning bidder), even if it costs you a bit more. That way, you will know you are being told the truth. And yes, the sales contract reads like you are heading off for your execution! Basically, they are explaining that they have never seen the property, they are making no claims or warranties as to the condition, they will not do a single repair, so buyer beware! Additionally you must pay all financing expenses, closing expenses as well as a 5% buyers premium. So, you must take this into account in your final bid price. As an example, if your winning bid is $200k, you are actually paying $210k plus closing plus financing costs plus any repairs required...so DON'T OVERBID! If you are not experienced in estimating repair costs, you must have a professional do an estimate before you bid. That means contractors, not a home inspector. If you are the winning bidder but have overbid and later decide to walk away, you will probably lose $2500 minimum (your qualifying credit card hold at Homesearch). So, you must get your Realtor to do a current market analysis, giving you a price for the home in it's current condition and what it could be sold for after the rehab.
If you love the home, and the numbers make sense, I would say go for it. Just don't get caught up in "auction frenzy" and bid more than is prudent. On the positive side, sometimes banks will give you a great price on a foreclosed property, so it can work out very well, as long as you clearly see the potential issues.
I just purchased a house of Hubzu the other day. I also have purchased a house of Auction.com. I can confirm that many of these online auction websites do in fact have straw bids. The house I got off of Auction.com got a straw bid at the last minute, uping the price by $1,000. Auction.com also mentions this on their website that this happens up to the reserve, so I expected it. I was the only person bidding on the house in any case.
For the house I just got off hubzu, I am not 100% sure the bid I got was a straw bid or not, but it came in at 20 minutes left to go in the auction. Still, the timing seems about right imho.
Realtor · Schaumburg, IL · Member since 2011 · 289 posts · 118 votes
12y
@Stacey Cole sorry I am late responding. We buy these all cash. I have no experience with Greenlight but @Kathy Lu is right.
@Nicholas Hollingsworth thanks for letting me know Niko. I'm glad to hear I wasn't crazy, I never read the agreement . Either way, I'm extremely happy with my purchases! Hope your acquisitions go swimmingly.
To make the @ work, do the following: Hold down the shift key and type @? Look below this Window, and you will see a list of names of people that have posted in this thread. Click on the name of the person that you want notified via an email, that you responded to them. If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name. Then look below this Window and click on that person's name. Raymond
Columbus, GA · Member since 2014 · 2 posts · 6 votes
12y
Hi
I am a rental investor, and recently purchased a foreclosure property (occupied by tenants), site unseen, for cash, on auction, on this site. Here are my comments.
- The whole transaction was painless, and we closed within 2 weeks, and I used their closing attorney with no issues.
- I was the high bidder, but the reserve was not met. They approached me to go higher, but I told them that I had reached the limit of what I was prepared to pay. It was a fair price, and they accepted. The price was in line with other comparable foreclosures in the area, and was also well below market value. It was also high risk because I could not see the inside of the property, do an inspection, and the property was still occupied.
- I believe that I was bidding against a "ghost bidder". (offer/counter-offer)
-The terms of the contract were all completely in their favor.
My conclusion is that they are a legitimate site. They are offloading (mostly) foreclosed homes, and that they provide an easy way to directly negotiate price through a series or offers and counter-offers (bids). I have no complaints.
However, buyer beware! If you are going to bid on this site, follow these guidelines:
1. Spend a lot of time doing your homework on the property. Know what it is worth, and what you are prepared to pay, including the risks, and any hidden surprises.
3. Make sure that they give you a Special Warranty Deed, not just a Quitclaim Deed. I queried this in the contract, and they said that it was a 'mistake', and changed it.
2. Decide how much you are prepared to pay, and don't go any higher. How much is the property worth to you, and how much can you afford? Do not budge from this. Avoid online auctions if you like to gamble, and can't resist putting in "just one more" bid.
3. Be sure to do a title search. I did a title search on one of their properties and came up with $15000 in liens against the property. I did my own manual title search and also paid for a title search on the property that I eventually purchased. Both came up clear.
4. Factor in the RISK when deciding your final price. If you have not seen inside the property, cannot do an inspection, and have tenants to deal with, than assume that you may not get access to the property for 4 months, and that the interior is a mess, and requires a complete renovation. What is it worth to you under these circumstances? Will you still come out ahead?
5. Bidding is very stressful. Try not to get emotionally attached to the outcome of the bidding process. You may not win this one.
6. Do not put another bid in immediately when you are out-outbid. The action will go into overtime if there is active bidding in the final hour and the reserve has not been met. Maybe there is no real reserve, and you are bidding against yourself. That is why it is important to know what you are prepared to pay. If your final offer is not a reasonable offer, they will not accept it. They have their ratios and targets to follow.
7. They will adjust the "bid increments" once they see that they have a serious bidder. Do not bid again if the larger increment pushes you beyond what you are prepared to pay. Wait it out. Watch the site and check to see if the increment comes down again.
I am curious to know if anyone out there has ever reached the reserve price. Also, do they always call the highest bidder?
@Kathy Lu@Christopher Leon hello ! Can you tell me status on your loans? I'm asking because my husband and I found a home we would love to fix up and wanted to place a direct offer. We were told we would have to go through the homesearch auction process. We read the term and conditions and it seamed the buyer had no rights what so ever and that homesearch could pull or change the rules of the game at any point. This did not sit well with us because we are just two people who are looking to move into a bigger home. Not investors not real state agents. Our realtor has not done nearly the amount of research I have. The home has been empty for 4 years. Had water in the basement and drywall was removed April 2014. They said that was 10k. After being in the home the air was very stale. I would like a remediation quote on the home an inspection and appraisal. I'm willing to pay For these services before I enter the auction just to make sure they can be fixed before I buy a money pit. Surprisingly we had a friend who is a home builder walk it with us and he said it was in amazing shape for being empty 4 years and encouraged us to make a move from his perspective. I had to go through greenlight and our rep is very professional and has tried every angle to help us overcome our auction anxiety by reaching out to the listing agent and asking the asset managers to go direct to no avail. Meanwhile I went to the courthouse and asked for records. There were over a million in liens against the home. It is listed for 307 starting auction price is 160k. Auction started yesterday. I found on the internet that the house was in a sheriffs sale in 2010. So that might explain the 3-4 million that was wiped clean but what about the outstanding liens to totaling over a million. Where did they come from? Gal at the courthouse said they were up to date as of July 10th. The greenlight rep said that the liens would be taken care of at escrow at closing and he was not aware of those liens or the mold removal. He said homesearch has never closed on a home without rectifying existing liens. If nationstar owns the property shouldn't they clear this stuff before putting it up for auction? This house was auctioned in March listed for 169k on 3/24. Sold for 169 on March 25 and was back on the market march 27 for 169k a month later went up to 291 and a month later landed at 307. Didn't the lien issue come up in march? So here are my burning questions if anyone can help me because I'm in love with this house but I've read all these horrible stories about nation-star and homesearch being a bad company and misleading people with paperwork not correct or incomplete or not disclosing all the details up front and asking for all this money and then when folks have a chance to read the paperwork they get after the auction they want to back out because the title wasn't cleared or whatever the case may be. I realize the risk you take on a property in foreclosure. What I wasn't banking on was the conflict of interest between nation star homesearch and greenlight. It seems like a huge conflict of interest and I don't know legally how this is going on. Would I be bidding on the home or one of the many liens? Will those liens indeed be cleared at closing so the house is free of baggage? Has anyone ever bought a home through home searched and lived to tell about it?
Any advice is welcomed before I drop a ton of money in an attorney to confirm something I'm already suspicious of? thank you in advance!
What is greenlight? Is it a lender? I thought auctions were cash only, or did you have the loan disbursed before bidding at the auction?
Realtor · Schaumburg, IL · Member since 2011 · 289 posts · 118 votes
12y
@Scott Campbell Greenlight is the lender or avenue of finance that homesearch.com teams up with. Who specifically they are? I dont know, I would be think they are some subsidiary of US Bank though. Most auctions are cash only, but some auctions will say the properties can be financed through the in-house lender, greenlight. I never used green light, I bought my properties all cash.
Here is my experience with homesearch.com: A while ago I was going to buy a foreclosed single family house in a decent location from the bank. They were asking $150k for it, and it was listed for 8 months already. The house had a damaged roof, every drywall, the floors, the AC duct - almost every inch inside was full of mold. (I could only inspect it wearing a special suit and signing a disclaimer!) There was serious electrical and plumbing issues, and there was an addition (4rd bedroom) that was never approved, not to code. Basically a whole rebuild after removal of the room not to code. I offered the bank $110k cash, since the rehab was at least $100k (conservative), including new roof, new AC. new electrical and plumbing all through, including new fixtures, appliances, floors and cabinets. Houses in the area sell for $180k-$240k. Being completely renovated, I knew I could get $240k for it after investing $100k. The bank said they will try homesearch.com, and I might be able to buy it there for the $110k I offered. The auction only depicted the front of the house, and no pictures of the inside (was probably too hazard to take pictres inside) . Some dumb *** on homesearch.com bid up to $185k for it! It was a person from out of state, who probably never saw the house. I could not believe what I saw, but hey, live and learn! I don't know if the system bid the buyer up with straw bids, but the buyer will for sure loose a big chunk of money on that project. I think there are bidders who watch too much TV (flip the house, etc.). To me it does not matter if the bids are rigged. You should not bid more than the house is worth. I watch the auctions close and bid weekly my self, and was never able to buy online, because I have a limit that stops before the real value of the property. Just today I bid on a condo in Naples with severe mold issues, bad AC, no appliances and knocked out windows. This I could have bought it from the bank for $35k before the auction, but it was too much. I sold a renovated condo in the same building 3 months ago for $52k, in mint condition, and bid the moldy one up to $22k at the auction today. It sold today for $50k! wtf? you can buy a renovated for around the same price in that area. I guess the website auctions only need one succer to make a good deal. If there are straw bids or not does not matter. If someone is willing to pay double than what a property is worth, why not take his money? When I sell a flip and the buyer begs to pay more than what I want, I take it anytime!
Ok, here's the update. The bank did accept our original bid. We completed the sales paperwork within the 72 hour window they allowed us and the bank ratified the contract the next day. So far, so good, right? Well.... I called the assigned closing agent (property is in Maryland, closing agent is in Georgia) and the interaction was very nice, very professional. However, the closer informed me that there "appears to be no recorded foreclosure deed" and no closing can occur until this has been taken care of. I ask "Does that mean that Homesearch.com just auctioned off a property that Nationstar Mortgage doesn't own yet?" The reply? "Yes." I ask "Any idea why they would do that?" The reply? "Your guess is as good as mine."
So, the closing agent has contacted the attorney handling the foreclosure to see if we can get a resolution to this matter. There might be a legal hitch, or possibly the legalities are resolved but just not recorded yet. I am hoping things will move forward, but I'm not holding my breath!
Fun and games in the foreclosure auction market....to be continued.
Look, @Kathy Lu, I am presently in this stag but the Deed in Liue is SIGNED by the previous owner on Dec. 18, 2014. We have already had one 15 day extension on escrow on a home that is OWNED and was LISTED by Nationstar Mortgage LLC and HomeSearch.com. This deed has not been recorded yet, even after 3.5-4 business's days. I am aware any transactions during the holidays. But we as buyers are very hesitant right now. We are ALL CASH BUYERS, no financing at all. But we signed the original purchase contract on Nov. 14, 2014. I am scared but @Kathy Lu, I'd like to know what happened in your transaction.
Thank you and MERRY CHRISTMAS! Give me and my family of 5 some prayers please.
Sun City, CA · Member since 2014 · 4 posts · 0 votes
11y
Continuation from last update:
"Turns out that Nationstar actually owns HomeSearch.com and basically uses the website to "auction" off its REO portfolio. I am only hesitant due to the fact that we are cash buyers, been in contract since Nov. 4, 2014, and it seems like this transaction has just been muddy since the beginning. I will definetly keep people updated on our status on this transaction. We are very invested in this transaction. Literally packed up and moved from Las Vegas, NV from our rental home in mid December 2014 (month and 10 days into our purchase contract) and basically expected this to close before the New Year.
Columbus, GA · Member since 2014 · 2 posts · 6 votes
11y
I just want to update this post ...
It took me two months to get the tenants out of the house, and only $4000 to change a few light fittings, make the pantry into a laundry, and paint interior, and lay new carpets. The house is great, and I have a very nice tenant. The market value of the property is at least 40% more than I paid in total, including rehab. Very happy with this transaction through HomeSearch.com.