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US Home Auctions, Real Deal or Just a Gimmick to Sell Undesirable Homes?

jpeg On Saturday March 29th I had an appointment to view on of the REDC's Auction properties in Fullerton, with on of my new clients. I had already registered myself and The Smiths, for the auction that would be taking place the following weekend. This would be my first experience with this Auction Company so I read all of the rules, regulations and disclosures made by The Real Estate Disposition Corporation very carefully.

Basically it appears that they are responsible for nothing and yet they are charging the buyer a 5% Premium for purchasing a home and they are paying a licensed Realtor such as myself a 1% commission to assist the buyer through the auction, explain the buying process and potentially "take the fall" if the home is a lemon.

I do not mind accepting a referral fee of 1% for an afternoons work and giving my advice but I sure do not want to take legal responsibility for a home that I know nothing about. Also why should the buyer pay the REDC 5%, to buy on of their homes? That's a big chunk of money that a buyer could use purchasing a home "on the market" where they would get some kind of history and disclosure from the previous owners.

Even if you purchase a Bank Owned property listed on the MLS at least you know that there are two California Licensed Real estate agents involved in the transaction that do not want to get sued over selling you a home that might have "unforeseen problems". In addition it the banks can not and will not "cover up" potential problems with a home such as mold or extensive termite damage.

When arriving at the home around 12:30 P.M. there was no representative from REDC. I reviewed the REDC catalogue and I was right it did say that all of their homes would be open from 10:00 a.m. to 5 p.m. Lucky for me and my clients I had my lock-box key and we viewed the home. It made me wonder...What's really going on here?

The property is in a good neighborhood but needs extensive repair. It is listed at an unrealistically low price. I advised my buyers of the fair market value in the neighborhood and they decided that they would like to attend the auction. I gave them my opinion that the home will most likely be bid up a few hundred thousand dollars, above $400,000, near market value. We all decided it would be a great adventure anyway, so I'm off to the US home Auction on Sunday!

Written By Tina Maraj Shah Realtor at RE/MAX North Orange County

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Posted by Tina Maraj Fullerton Realtor on 04/01/2008 10:04 AM

Comments (24)

redc, ushomeauctions, bank owned homes, fullerton real estate agent, tina maraj shah realtor, bank repo, reo, foreclosure

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24 Comments on US Home Auctions, Real Deal or Just a Gimmick to Sell Undesirable Homes?

APR

2008

Hi Tina! I have the same situation going on here. My client chose a home from the MLS. Lo and behold, there is a USAuctionHomes sign in the front yard. We're going to the sale to see what happens.

I agree, 5% is a HEFTY buyer's premium.

Hi Tina,

Interesting. I spent all day myself with a couple of REALTOR friends looking at homes in the desert area (looking for myself) surrounding Palm Springs. From low end condos on up. I previously went online to sign up and get pre-qualed at the same time.

Then on Sunday after talking with another agent I realized that even though these are advertised to be sold, they are still subject to investor/lender approval. Meaning if the reserve is not met, the sale will not be finalized. The same properties could be auction off 2-3 times.

Ah Ha ...There is a catch! Thanks for your input Lynda!

APR

2008

I went on tour today in Sacramento and am curious how it goes for you at the auction. If it appears to good to be true, it probably isn't.

I am curious to hear how this one turns out. I know there are some auction companies that charge the buyer 10% premium and they are not typically bank owned properties. Seller can be responsible for advertising costs. I also know there can be a "reserve" price as mentioned earlier. You can do all the work, decide your maximum but after all is said and done, you could still be left with no house. Make sure you blog on the auction itself! I am eager to read!

Here is a tidbit for you, did you know that REDC is also the company sells the parcels in Arkansas that Eric Estrada sells on the informercials??? Yep. It is true!

APR

2008

That tells you something. Thanks for that bit of information.

APR

2008

Tina, we want another post about this! We want a blow by blow description of what went on! I've never been to one of these and it could be excellent blog fodder!

I went to one of the US home auctions with a few buyers and there were some properties that were resold 3 to 4 times

Mike, What does that mean, "resold 3 to 4 times?" What happened at the auction?

APR

2008

I also noticed that when I attended. It appeared the if the buyers didn't qualify or agree to the disclosures then the property went back up for sale. It really messes up the timing if you are trying to figure out when YOUR property is being auctioned!

APR

2008

So Tina,

Did your people get the home? If they did not, some auction companies will sell on a one on one basis as well. Let us know what your final result was.

Craig

APR

2008

I was interested in a few properties that were auctioned in Sacramento on April 19th and April 20th but was unable to attend. Could someone tell me what #37 1145 Revelle Dr Dixon, #38 304 Vazquez Court Dixon, #261 34750 Mallard Street Woodland and #368 12100 Snowpeak Way Truckee were sold for. Thanks!

APR

2008

#37 sold for $410k then came back on the block and sold for $400k.

#38 sold for $200k.

I did not attend the second day of the auction.

I am all for these auctions. They do a great job of rapidly moving large quantities of homes (100+ per day) at prices that are good (not great) for home buyers.

For us to see appreciation again, we need to return to an excess demand market instead of our current excess supply market. These guys are helping us to accomplish this.

MAY

2008

let us all know how it turns out. my experience has been like yours: stuff gets bid up to fair market.

these REDC companies are taking a 5% premium because they are holding the paper. most cases: they own the properties. these are hard money investors who have gone to direct to countrywide or bofa etc and told them "we have $2 billion in cash and want every one of your coastal properties REO from zipcode 90401 through 90803" the bank gives them a list, redc negotiates quantity and area, the bank unloads them as is and quickly and the redc hopes that by NOT paying a premium AND utilizing buyer's auction hysteria, they'll turn some coin.

MAY

2008

Here in California North Hollywood I saw an auction with a 10% PRemium, thats right 10 percent. I barely afford the starting bid, I know im not going to win but i still want to know how much its going to fetch for.

JUL

2008

Does anybody know what the end result was for Tina's clients at the auction?

Virginia, I do not, but I successfully bought a house at the Sacramento auction several months ago. It is now rented.

MAR

Sounds like they are trying to sell the AMERICAN dream for more then they appear it to be. I am interested, because I would like to buy a home for my family, but the only way I can do that is threw some type of auction that is genuine. Does anyone have any suggestions for me.

MAR

Melissa, Auction price are often bid up to market value. Your best bet is to employ an agent to track the new listings to find you the hot foreclosures when they first hit the market. Also many equity sellers are willing to make deals and pay closing costs.

I agree, find a sales agent and work with them. You most likely will get a better deal.

MAY

What is the deal on short sales? I have heard awfull stories and that most realators stay away form a home that is short sale.

JUN

Hi Mari,

Short sales are difficult for a number of reasons. I have been successful closing short sale transactions as many other REALTORS have, but the reality is very few short sale transactions close. As a buyer you can be tied up on escrow for several months and not be able to purchase the home. I invite you to call me for a more detailed explanation.

Only 28% of Short Sales that are listed ever close escrow here in San Diego. This is due to mostly to incompetent agents and overwhelmed banks. We have been running at a success ratio above 90% in our office and this is due to understanding the banks systems and being incredibly persistent!

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