October, 2007 Part 15 Auction or one hand tied? Merrimack Journal
Reality of Real Estate Auction or One Hand Tied? Part 15
Dr. Anthony G Ziagos, Sr.
There has been much reported main stream media about rise in foreclosures. The foreclosure process occurs when a debtor fails to honor their commitment to a lender. The lender must protect their financial interest and the collateral that was pledged for a loan. Terms and conditions of a loan are spelled out in advance as well as default and recovery procedure. There are numerous options prior to Auction of property that can be considered. If lender and borrower cannot agree on a resolution, property is auctioned off to the highest bidder. Despite every effort that a lender and borrower make an auction sale may be the only resolution. Auctions do not necessarily mean distress sale. In Massachusetts the regulations and rules that must be followed are very specific and designed to prevent errors during a stressful time.
I can tell you from experience, sometime the rules get in the way of resolving the issues. No one can blame anyone for protecting their rights. Every auction presents its own set of circumstances that may or may not contribute to the desired result. Mortgage holders refuse settlement offers in hopes of getter a higher bid an auction. Sellers may or may not cooperate during the sale procedure. Due diligence and "AS-IS" are frightening concepts for most buyers. Cash requirement is the biggest hurdle to a successful auction sale. Most lenders miss out on a great opportunity to fund buyers for this type of sale.
At a recent sale the mortgage holder refused offers on a defaulted loan the the $250,000 range. After six months the property was auctioned and the mortgage holder only got $ 180,000. Another example was an auction sale, subject to confirmation, that only produced a high bid of $150,000. The lender declined to sell and subsequently resold the property for $250,000. The original asking price was closer to $300,000.
Rarely are canceled auctions reported. I have been to several sales where the mortgage holder didn't even show up for the sale or report a settlement prior to the sale date. Lenders buy back property at the auction sale to "perfect their right and title" then subsequently offer property for sale hoping to cut loses but offering a potential buyer a less complicated sale even after incurring more selling costs.
The auction process is not for the amature. Due diligence and experience is at the heart of successfully buying at auction.
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