punamytsike,

I started to write a detailed description of how a foreclosure auction works because there are some misunderstandings in your post. But, after 10 minutes of typing it was becoming obvious that it was heading in the direction of an epistle so I deleted & started over...

Just to answer the questions in your last couple sentences:

Who initiates it? The originating lender (99% of the time). That's because the originating lender most likely has a servicing contract which includes the handling of potential foreclosure sales.

How does the court house steps auction differ? Not all states conduct foreclosure auctions on the Court house steps. Some states hold foreclosure auctions physically at the property being foreclosed. The auction of a property held as collateral for a security is no different than any other foreclosure.

Who would bid there? Anybody who met the criteria outlined in the advertised Public Notice of the foreclosure auction. Usually, certified funds in the amount of 10% of the property's appraised value are required to obtain a bidder's number. In addition, the lender will have a representative either present or already made some other type of arrangement to enter their bid. In the case of a CDO (Collateralized Debt Obligation), the servicing agent (originating lender such as Countrywide) will act as the lender for the foreclosure process.

Is there opportunity there or is it even more likely to get burned??? That's a subjective question. The more one knows about real estate the less likely one is to be "burned" purchasing at a foreclosure auction. It is not the way for a first-time home buyer to purchase, IMO. However, there is no difference in the auction process just because some hedge fund has purchased a mortgage that is secured by the property being foreclosed upon.

/t

Thank you triciae,

So if I read you correctly there is no difference if the loan is bank owned or owned by hundreds of individuals across the world?

That's correct...the laws/statutes don't care who owns the property. The process is the same. What's different is that the mortgagee may be represented by a servicing agent.

/t

I looked at your web site & concrete work and had to post to tell you how talented you are. I'll have to go back when i have more time, but what I saw was done really well.

With an MBS, the originator usually does not sell the actual loans, instead they group them and create a derivative (something that gets its value from what it is tied to, like a stock option) that is securitized by the mortgages.

I also looked at your work and home and was very impressed with your work. What a lovely home you have. I especially like your pet Alligator. We use to have them in our lake behind our house until everything got built up around us and people started calling the trappers. Now the trappers have gotten rid of all of them because of the insane fear people have of them.

Thanks triciae
Thank you roselvr for your compliment. I enjoy projects ;)

If you want to see more what we have done, then our house sales site has more updated photos. We are not currently listed as the market is dead, but I update the site regularly, as we finish new projects :)

Here is a link that might be useful: Our house sales site

kitchenshock, we posted at the same time :)
Interesting, I would like to read more about how this is supposed to work, anyone have a link?
and thanks for taking the time to look at my work and giving feedback.

Just one clarification, on those courthouse steps, the bank isn't the only one there bidding. Anyone who wants the house can be there bidding. Some Sheriff sales bring in crowds. The only reason the bank guy/gal is there is to assure that the house isn't sold for less than their interest in it. That's why you can't always get a house for 2/3 of appraised value, if more than that is owed against a house. The bank won't even open their mouths to place a bid, if the bids are already high enough. You won't even necessarily know they are there. Your deed reads that you bought it from the sheriff.

Oh calliope, how I wish those bidders would not have known I was with the bank! rofl

I was the one in the business suit standing with the attorney & chatting with the auctioneer...stood out like a sore thumb, I'm afraid. During winter, I wore jeans & still everybody knew me.

There are 'groupies' that follow a particular loan officer's foreclosures. They show up prepared to bid at every auction. You get to know them & what kind of property they are likely to outbid you on.

You noted that, "The only reason the bank guy/gal is there is to assure that the house isn't sold for less than their interest in it." That's not true. I was there to make decisions for the bank as well as to bid the property in, if necessary. For instance, if the property had environmental issues that I wasn't comfortable with or a title flaw that couldn't be insured around...I might make a decision 'on-the-fly' to let the property go for significantly less than what the bank was owed if I got a ANY bid (that would be an example of keeping my mouth shut!). Or, if a bid was close to our number I might also decide to let it go. I was also there to answer questions for the bidders. I was there to protect the bank against any issues that might arise. I also took possession of the successful bidder's deposit check...and, yes, sometimes I received $50K, $60K, $100K in cash & had to be escorted back to the bank.

Different states uses different types of deeds. For instance, in NH & CT, you can foreclose via judicial foreclosure or non-judicial foreclosure using a power of sale clause in the mortgage. Each sale uses a different type of deed.

So, for those who might not be located in Ohio...it's necessary to know how your state handles foreclosures.

/t

I love reading your insider input, Triciae. I've done the sheriff sale thing a few times and walked away with the house twice, and lived in both houses. It's not for the faint of heart, however. LOL. Both had been vacant at least two years. One vandalised, the second, I found hutches of dead and petrified rabbits in an upstairs bedroom. When the owners left, they left pronto.

It may be an whole new ballgame with the high-end forclosures, but then they were the exception and not the rule. You could almost expect most of them to have had equity in the home and that those poor folks who were evicted actually ended up with money after the deal from what was left over when the creditors took their share. Had they auctioned their properties as private entities , they'd have escaped foreclosure and perhaps a bankruptcy.

The first house needed a minimum of hard core work, but it took a month to clean it out and another few months to make it liveable and comfortable. The second? OH LORDY. That one was location, location, location. The house was a money pit. We bid above the 2/3, up to the appraisal price and were there some sore folks in that courthouse lobby, who banked on walking away with it a the base price. Got eight years of habitation out of it, a decent return on the investment, and good memories, but the work wasn't for the week-end warrior.

I am almost afraid of the process anymore with the lack of equity in the homes, and those who had equity usually have used it to the hilt by borrowing against it as ready money and lost it.

The very last one I even looked at four years ago was appraised for about 1/6th of the debt incurred against it. Everybody in that county wanted a piece of the pie when it went up for sale. I didn't walk away from it, I ran. LOL. The people who lived around it came down to see who the sucker was looking at it.

I do the same thing you do. I usually dress as casually as I can get away with (my workclothes and I work in dirt). But when I want to make a trip to city hall to snoop, it's my wool suit, heels and my leather briefcase. The office clerks are almost afraid to blow you off, for fear you might "be somebody". Love that small town life!

Residential foreclosures 'can' be interesting & a bit exciting; but, it was the commercial ones that always kept me at the bank late with my calculator.

I once shut down & foreclosed on a new Chevy/Buick dealership who had been commiting fraud & was out of floorplan with GMAC. In other words, he'd been 'cooking the books' to GMAC. When the originating loan officer came slithering into my office with the files loaded on a cart I knew it was going to be a long week! It took me days just to figure out what we had mortgages on, what was covered under our UCCs, & what personal property we'd liened as secondary collateral. In the end, I had all of the parts inventory, the land/buildings of the dealership, the personal residence of the dealer, his second home in a resort area, and a third lien on his first-born son! lol

I arranged a 'sting' operation with the Sheriff & we entered the dealership by surprise shutting him down on the spot. He was taken away, under arrest, by the Sheriff. I was left operating the dealership for the rest of the day! At 6:00 p.m., I ordered all of the doors locked & the "Closed" signs put up, called all of the employees into the showroom & gave them the bad news that they no longer had a job except for half a dozen I needed for a week to help me figure out where everything was.

There were huge environmental issues with the property because the EPA regs hadn't been followed for all of the used oil, etc. coming from the repair shop.

About 3-months after I shut the place down, I held a 3-day auction for all of the parts inventory. We went 12-hours/day for 3 straight days! I was pooped. We tried to sell most everything in lots but eventually it was one tire at a time & one bin of bolts at a gavel. I had about 1,000 people at the auction & had to make arrangements for an ambulance/fire truck to be on-site in case somebody got faint from what they'd just paid! :)

Then, after all of the 'stuff' was gone I still had to get rid of the property. Because of the environmental issues the foreclosure auction was a dud & I ended up bidding it in to REO. Undaunted, and being responsible for unloading that dog for the bank...I started making phone calls. After terse negotiations that continued over about a year period of time, I sold it to a multi-conglomerate & they built a national chain restaurant that we're all familar with on the site.

Then, had to evict the man's poor family from their home of over 40 years & foreclose it. I took everything they owned (except that first-born son who was a JD & I didn't think he would bring much in the open market!). The borrower had signed a personal guarantee so I even took their boat, jet skis, even the lawn tractor. I was relentless over the course of 12-18 months.

My borrower's still in the slammer for bank fraud...plus GM got him crimmally as well. He'll be out soon & I'm very glad I don't live in the same area anymore because I'm quite certain he's not my friend. But, gosh...he could have avoided the entire sorrid affair by just coming into the bank & saying, "Help, sales are down!" Instead, he chose to commit fraud. Do the crime, do the time.

It's a good lesson for the Forum though. If anybody reading these threads is one of those homeowners who's having trouble with an ARM...go talk to your lender. Don't wait until you're 90-days delinquent & they don't have as many options to help you.

/t

Wow, that's pretty extreme!

Just a question: What did you leave the guy's family with? Were they able to keep anything at all, or did you take everything they had on the basis of the guy's personal guarantee?

I don't mean that as a hostile question, more just curious how the process works?

thewgp,

He originally filed for Chapter 13 bankruptcy but since he was arrested the Court denied his reorganization plan & the BK moved to Chapter 11. That's why it took me 3-months to conduct the parts auction. I had to get Court release of stay.

The judge allowed me to take anything over $1K in resell value. He was allowed to keep a car, the household stuff, a bit of the cash, and much to the bank's detriment he was allowed to keep a couple pieces of heavy equipment because the bank had failed to properly obtain & record the necessary liens. It was deemed a 'fatal flaw' by the BK judge. Not my fault...I was a work-out officer. I didn't make the original loans. By the time all was said & done, the bank lost just shy of $1M.

/tricia

Oops, it's early here...I goofed.

He converted to Chapter 7 which is liquidation.

/tricia