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Buying at auction: mechanics of auction

Anonymous User
August 01, 2010 11:21AM
I have several questions re: buying a foreclosed home at an auction, and I'm posting them 1 at a time under separate topics, so other readers may benefit (I wouldn't be clicking on a thread that says "a bunch of foreclosure questions". ) Please read past the background bulletpoints for my question.

Here's the background here:
* home is in CA
* senior lien is 500K
* junior lien is 270K
* the foreclosure is handled by ReconTrust
* I will pay for this property in cash
* junior lienholder has been trying to sell the property at a short sale, but probably won't be able to, b/c they are holding out for a very high percentage of their 270K (I know b/c I was trying to buy during the short sale)
* it's the senior lienholder who is foreclosing on the property
* I have inspected the property when I was bidding during the short sale period, so I have an information advantage over other potential bidders at the auction
* I bought a home in 2004 and sold in 2008, and haven't owned since (so I think I am legally a "first-time homeowner".
* I intend to live in this home (i.e. I'm not an investor).
* I would estimate the market value of this property at 630K - the homeowner would have no equity left under any realistic circumstances
* For purposes of my questions, assume no other liens (property taxes, etc.) exist.
* I intend to bid at the Trustee Sale / Auction
* Special thanks to Steele of MN, almost all of whose postings I've read

My understanding is that the auction is not 'sealed bid', i.e. people keep calling out increasing amounts. I also understand that the minimum bid can be set low just to generate interest.

1) Is the 'reserve price' (sorry, using ebay terminology) known ahead of time? (i.e. if I call ReconTrust, will they give it to me?) I have a pretty good idea of what it will be - probably a bit over 500K - but I want to make sure I know what the senior l/h's minimum accepted price (not minimum bid) will be, so I can bid slightly over that. I am assuming the senior l/h is not going to want to bid above this amount (why would they? They wouldn't be keeping any money over 500K), and that the junior l/h will not bid for the property nearly as aggressively as I would (I have reasons to believe this but they're not relevant to this question).
2) If no, is it known at the time of the auction? This is important b/c if I'm the only bidder, I need a way to know if my amount will be accepted or not.
3) In order for the property to revert to the beneficiary (senior lienholder in this case), does the senior l/h have to explicitly bid for the property in the auction? (which implies that a ReconTrust rep will be present at that auction). OR does it revert by default if there are no bidders?
4) When I show a bunch of cashier's checks to the auctioneer to prove that I can participate, nobody else gets to see the amount, correct?

By the way, I'll go to several auctions just to observe before the auction for the property I want to purchase. I'll also make a note of the people who are there, their bidding strategies, etc. etc. I'll also speak to a real estate lawyer. So I'll take care of the obvious careful-you're-playing-with-fire issues. But thank you for pointing out these issues!

Thank you for your answers.
Subject Author Views Posted

Buying at auction: mechanics of auction

Anonymous User 1084 August 01, 2010 11:21AM

Re: Buying at auction: mechanics of auction

steele in minnesota 610 August 01, 2010 03:00PM

Re: Buying at auction: mechanics of auction

Jim V 485 August 01, 2010 03:18PM

Re: Buying at auction: mechanics of auction

Jim V 483 August 01, 2010 03:14PM