Investors announced bids within seconds of each other on some steeply discounted foreclosures auctioned on Friday in front of the Santa Ana Courthouse.
I attended the trustee's sale to gauge investor interest these days and to see if the state's foreclosure moratorium, which began earlier this month, is having any impact.
Whenever I attended auctions in 2007 and 2008, investors generally passed on properties. But on June 26 they jumped on houses and condos with discounts of greater than $100,000 on the debt and fees owed on each property.
For example, at least four people bid on a two-bedroom house in Anaheim on Zeyn Street. Winning bid: $206,000. Amount owed before foreclosure: $565,000. Discount: $359,000. (Amounts are rounded to 1,000, and I assume amount owed is on first mortgage. There could be more liens against the property, but they should be eliminated by the auction.)
The discount is what the bank is willing to accept; it's not directly related to the current market value, though I am sure the bank has a ballpark value in mind when it decides how much to accept. Zillow estimates the Anaheim house is worth about $301,500.
At trustee's sales, properties are sold as is, meaning there could be property damage and the owner, or former owner, may have to be evicted.
Another risk is if there are competing foreclosures nearby. I checked ForeclosureRadar and here are other foreclosures or potential foreclosures within less than a mile of Zeyn Street.
The map shows five bank-owned properties (red dots) and many more notices of default (green dots) and notices of trustee's sale (blue dots). The map suggests dozens of potential foreclosures.
A few other examples:
- Another property in Anaheim, a condominium on South Walnut, sold for $154,000, 57% off the debt owed of $358,000. At least three investors bid on it.
- Two investors went after a two-bedroom condo in Aliso Viejo, repeatedly raising bids by increments of $100 or $1,000. It finally went for $293,500 - but despite the heated interest that price was 35% off the debt of $452,410. Zillow says its worth $315,000.
- A property on West Sunflower in Santa Ana went for $110,500, close to a third of $319,663 owed.
What about the state's 90-day foreclosure mortatorium? Well as I said previously, dozens of lenders and loan servicers have already received permanent or temporary exemptions. They just need to show they are currently modifying loans.
With that said, many foreclosures appear to be repeatedly delayed. More than 200 properties were originally scheduled for auction on Friday, but the day before I counted just 94 still scheduled for June 26.
The auction started at noon and two hours later only about a dozen had been auctioned, with more than half going back to the bank. I had enough and left. However, I plan to attend once a week or so, and am happy to meet any blog regulars at an auction.
One last thing, of the 94 scheduled for Friday nine owners had filed for bankruptcy, roughly 10%, which suggests the foreclosure had been previously delayed
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