If buying a house wasn’t enough of an adrenaline rush already . . .
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No question it’s a buyer’s market in housing these days.
Lots of homes are for sale and are staying on the market longer.
So there are bargains to be had.
Perhaps nowhere more so than at foreclosure auctions. Which are popping up around the country. I attended one a couple of weeks ago at the Los Angeles Convention Center.
It felt more like a party than an event made possible by people losing their homes. It was the second of three auctions held here in Southern California by Real Estate Disposition Corporation. More than 2,000 people packed into the convention hall to bid on 92 properties. All owned by banks and other mortgage lenders left holding the bag.
AUCTIONEER: Ladies and gentlemen thanks so much for being with us today
Before the auction got under way, the auctioneers made sure everybody knew the rules:
AUCTIONEER: Now you should have personally inspected all properties you are interested in purchasing. Each property is being sold as-is, where-is and with all faults with no guarantee or warranty whatsoever.
Getting a home at auction involves even more risk than the usual method of open houses and real estate agents. Buyers had just one weekend to view the properties and get any inspections done. But that didn’t stop the frenzied bidding once the auction got underway – starting with a three-bedroom, two-bath home previously valued at $475,000.
AUCTIONEER: Sold in the back at 425.
The pace of the auction was breathtaking. Five homes sold within the first eight minutes. Auction assisants in tuxedos raced around the room pointing out buyers as the bids rose.
Most of the winning bids at the Los Angeles auction weren’t huge steals – wsually within 20 percent or so of the original value. But the winner on the first property, Magdi Abouisa, wasn’t complaining.
MAGDI ABOUISA: A few month ago I wanted to buy some investment home and I went and checked prices and it was very high. In the auction you have potential at least if it’s not as it’s claimed to be 50 percent of the price, it could be 70 percent of the price which is OK for me.
VIGELAND: So this is investment property for you? You’re not planning to live in the home?
ABOUISA: Well I have an option, I might put one of my family in there or could be potential for sale.
VIGELAND: Does it enter into your mind at all that you are able to purchase this house because someone wasn’t able to afford it?
ABOUISA: Yes I do, and you know what I sympathize with people when they lose homes. But for me to feel bad about it I am not the one who evicted him, you know, I am the one who came and bought and that’s how it goes.
Abouisa was typical of many buyers at the auction – an investor hoping to get a good deal then turn around and sell.
Suzanne Holub made the winning bid on house number 14.
She paid $370,000 for a four-bed-one-bath home previously valued at $455,000.
SUZANNE HOLUB: Well I’m just gonna buy it and flip it.
VIGELAND: Even in this market, still doing the flipping.
HOLUB: You know why, because I think there’s some hidden value in the property because it’s got a bigger lot than what they have put down.
Holub was meeting with a financing team when I spoke with her.
After placing a winning bid, buyers were escorted to an area filled with lenders offering some of the exact same mortgage products that got the original owners of these homes into trouble.
HOLUB: Five-year ARM is fine, cause I’m gonna flip in you know hopefully two to three months, the lowest the payment the better.
The lenders were also offering so-called low-and-no-doc loans, which don’t require borrowers to prove their income.
What buyers DID have to bring with them was a $5,000 cashier’s check. Plus a personal check to cover the rest of a 5 percent downpayment.
Each winning bid also had a five percent premium tacked on by the auction company.
So who shouldn’t buy a house this way?
I put the question to the chairman of the auction company, Rob Friedman.
ROB FRIEDMAN: I would say anybody who hasn’t done their homework. I mean you shouldn’t come to an auction and just think because you’re smart you’re gonna get a deal. You need to go out and look at the property, look at the comps and come armed and educated. In today’s marketplace this is a fabulous way to buy a piece of property and you will definitely save money. Again I will say the best thing to do is to be knowledgable.
In other words, no matter how festive and fast-moving it may be, don’t come into a foreclosure auction thinking that getting the home of your dreams will be.
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