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My First Foreclosure Auction in Arlington!

By Laura Rubinchuk Schwartz

Real Estate Agent with Keller Williams Realty

January 10, 2009 08:53 AM

On Friday, I had the exciting opportunity to go to a foreclosure auction on a property in Arlington, VA that my client was bidding on! We had written an offer on the property when it was on the market, but the bank foreclosed when he didn't accept it. I had no idea what to expect, so let me retell my experience for those of you who are curious!

1. Let's clarify what a "foreclosure" means:the terminology gets thrown around a lot, but a "foreclosure" is actually when the property is up for auction! If no individual buys it at the auction, technically the bank buys it! When the property comes back on the market through a Realtor (R) after the auction process, it's actually a bank-owned property, or Real Estate Owned (REO) - not a foreclosure as we commonly call it.

2. What to expect when you have nothing to expect! Be prepared for a very fast talking man in a suit representing the Trustee (in most cases an attorney's office). He'll read through the public statement, then tell you the opening bid on the property. He'll ask for bids...if you bid, be prepared to show him your deposit. Most ads will say "minimum X% or $X, whichever is the lowest of the 2." It'll be a cashier's check made payable to the trustee. He'll say "going once....going twice....sold for $xxx." Then you usually sign a one-page contract (which is advertised as your right to preview before the auction, but if you can ever get a live human being on the phone from one of these attorney's office...please share your secret!!)

3. I won?! Now What? Now, they give you a 15-day close period....and you're buying it subject to any other liens on the property. DO A TITLE SEARCH!! You want to know what you're getting yourself into! You need to know if the 1st, 2nd, etc. lien holder is foreclosing. This is CRUCIAL! It'll impact your top bid price tremendously, if you're buying the property subject to an additional $100,000 lien!

Also, another note...don't be intimated!! This particular auction had about 20 bystanders, and only 2 real bidders. The 3rd bidder bowed out after his opening bid! Go with confidence!

And..dress warmly!! They're held on the courthouse steps (usually) in RAIN OR SHINE!!!

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Chris Martin

Holly Springs, NC

Your VA foreclosure process sounds much like NC, also a trustee state, with a few exceptions. We don't have a "right to preview before the auction" and occasionally the properties are still occupied by the owners on the day of the sale. Also a slight difference, NC has a 10 day "redemption rights" period rather than 15.

My only additional piece of advice: do a preliminary title search before you win the bid. In NC, the trustee picks up 5% and you lose it if you do not honor the sale. The trustee can also sue for performance and collect the difference between your (unexecuted) bid and a subsequent sale if the subsequent sale is less than yours. As always, check your state's laws.

Jan 12, 2009 01:31 AM

David Width Jr.

Little Egg Harbor, NJ

Thank you for sharing this experience. I have not been involved in anything like this, yet. I'm sure with the way things are it won't be long before I find myself at one of these events.

Jan 12, 2009 01:44 AM

Brian Griffis

Realty Choice - Springfield, MO

Maybe your experiences are different, but every foreclosure sale I have been to has been a disappointment. First, one can't even go in to inspect the houses here, so one doesn't even know what the house looks like. Secondly, you have to buy subject to all loans and liens etc., and they may not all have been recorded yet. So, one would not want to bid very high obviously. BUT, when I go to these auctions, there is always one person who bids REALLY high. I have been told that it is usually a person representing the bank who will bid what is owed on the property, which often is MORE than the property is worth now. I have never seen one of these that is a bargain yet, although everyone seems to have a story of the $1 house. Has this been any of your experiences?

Jan 12, 2009 02:58 AM

Brian: There is indeed unseen property risk. The kind of houses I buy are usually physically impaired. $1? I usually get them for about 60% of assessed value and put about 15% additional in for repairs. Then I rent and refinance at 75% LTV. I try to hit "singles" and rarely hit a "home run." My analysis to purchase ratio is about 250:1. Patience is key.

Jan 12, 2009 04:17 AM

I am glad you have the patience Chris. Unfortunately, there aren't 250 of these homes for sale in 10 years in my area, maybe why I have never found a good deal. I think you are right on though, just be patient, and there will be a deal.

Jan 13, 2009 12:22 AM

My First Foreclosure Auction in Arlington!

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