Realty Bid - What Am I Missing?
by Pam Simpson
The Kudzu Vine
I've noticed over the last couple of months a significant number of bank foreclosure listings in my area being placed on Realty Bid. Realty Bid is an on-line auction service. Their banner says "Benefiting Buyers, Agents & Sellers Alike".
Since I have represented a number of REO buyers, I decided to poke around a little on the site. I saw that a few of the properties up for auction in my area had bids, but apparently there are 'reserve' prices which had not been met. I also noticed items labeled 'Fees' that sparked my interest. They say that they will pay a Buyer's Agent Fee of 2.5% or $1,000 (whichever is greater). They also charge a Transaction Fee to the Buyer at closing. The ones I looked at ranged from $2,000 to $5,000. (WHAT???) The required Earnest Money Deposit is about twice the amount my area is accustomed to seeing.
On the sidebar of the page, I noticed an area labeled "Info Center" containing a number of questions that a buyer might have. I clicked on the one that said Terms for Bank Properties. Being that I was a legal assistant in my former life, I like reading the small print. It had the normal "AS-IS" language that everyone expects in an REO listing, but it also stated that the buyer had to perform inspections prior to bidding. Since I can only speak for our local customs, I can tell you that is not normal for our area. The fine print also states that a financed sale has "to close within 30 days with NO contingencies and contract concessions, whatsoever." That means no appraisal nor financing contingency.
Further down, the terms state that if the bidder fails to close for any reason in the specified time-frame, their credit card may be charged a default fee of $350. This indicates in order to bid, you must supply your credit card information to this site.
OK - so here is why I ask "What Am I Missing?" I can see how this auction format benefits REO sellers and perhaps agents, but how does it benefit buyers? I thought, perhaps, that the buyers were getting steals that make up for the risk they are taking. I looked at some closed auctions in my area and compared the winning bid with the MLS listed price for that property. What I found was that in most cases, the winning bid was only a couple of thousand dollars less than the MLS listed price.
I have represented buyers where we were able to get the REO seller to come down that much plus pay closing costs and the buyer did not have near the amount of risk involved. So, what am I missing? This is a fairly new phenomena in my area and I am anticipating running into a situation where my buyer wants to make an offer on one of these homes. After explaining the risks (and document that I explained the risks) to the buyer, how can I demonstrate that this format benefits the buyer?
Would appreciate any comments!
Edited 10/24/2008 7:20 p,m. to add:
I checked to see which state had the most properties up for auction on this site. Florida takes top prize with 120 with Georgia coming in 2nd at 81 and then Michigan at 77.
About the author:
Pam Simpson is a Broker-Associate with Bob Leigh & Associates, LLC in Northwest Mississippi.
Copyright© 2008 By Pam Simpson, All Rights Reserved...**Realty Bid - What Am I Missing?**
About the author:
Disclaimer: All information provided by this author is based on information collected from several sources and is believed accurate but not guaranteed.