It
is happening again. In the last real estate downturn, banks were so
flooded with foreclosures that they resorted to using auctioneers to
sell their repossessed inventory. Liquidation auctions by the FDIC and
the RTC (Resolution Trust Corporation) back during the late 1980’s
thrift and loan crisis were common, and astute investors profited
greatly. Banks, asset managers and other agencies find it convenient to
gather all buyers in a large meeting hall and hire an auction company
to sell to the highest bidder.
Attend Auctions
Auctions are of two types—absolute auctions and reserve
auctions. At an absolute auction the property will be sold, no matter
how low the bid. That property will be sold to someone that day. At a
reserve auction, the bank has a minimum price in mind—but they do not
tell anybody what that reserve amount is. They usually list what the
last sales price was and perhaps a starting or minimum bid. It’s like
giving you the low range and the high range in price of what they
expect, but they are under no obligation to sell.
Here are the eight auction companies that banks most often use:
1. Real Estate Disposition Corp. (REDC) www.ushomeauction.com
2. Kennedy Wilson www.kwiauctions.com
3. Hudson and Marshall www.hudsonandmarshall.com
4. Williams and Williams www.williamsauction.com
5. Premier Estates www.premiereestates.com
6. Quick REO Capital www.quickreo.com
7. Catalist Homes www.catalisthomes.com
The auctioneer makes his money by charging a 5%-10% buyers premium. Are
these good deals? I’ve heard mixed results, but I am sure timing will
be key. With barrels of houses coming back to the bank, bargains will
abound at future auctions.
Bank Auctions are a Lot of Work
Working the REO auctions is a lot of work, especially the big ones that have a lot of property because:
1. Hordes of investors and lookie-loos crowd mammoth convention halls thereby increasing competition.
2. The sheer volume of inventory
Bargains are to be found in these auctions, but you will have to
persevere. Auction companies work for the bank so they want to bring as
many prospective buyers as possible. Consequently, homes can get bid up
close to retail prices in these loud, cacophonous meeting spaces—not
what you are looking for. Open houses are held before the auction
weekend. Inspect as many as you can. You have to look at a lot of homes
to find the ones that are priced where you want them. It is best to
have specific criteria.
The bidding is quick and final. Be on the alert, or you may lose out on
your property. Most successful bidders arrive at the auction hall very
well prepared. Have your maximum bid amount already established so you
don’t get caught up in the excitement. You will forget what you are
bidding on so have a notebook at the ready with each property’s data in
one place. This notebook should contain: