正文
Real life story of judicial foreclosure auction, and why it could be a good deal for homebuyers
Hope it illustrates how the judicial process works. Looking forward to seeing a real life non-judicial story.
We fell in love with a house, which costs ~750K back in mid-late 2006. We visited the house on several occasions, first during open house, then with a Realtor. As priced, it's way beyond our price range, or comfortable price range. So we just kept an eye on it.
At the end of 06, the house was taken off MLS. Later we found out it was under contract for 740K, but didn't close because the buyer didn't get mortgage.
After the turn of 07, suddenly the house was found on foreclosure list, thanks to google.com. It was so shocking, since houses in such neighborhoods normally don't go to foreclosure. We followed the case closely. Even went to the auction site many times, just to see how it goes.
As the auction date drew close, we have several things to prepare. First, have the earnest money ready. It needs to be in cashier's check, about 10% of the expected sale price. The check would be made to yourself, in case you don't win and it'll be easy to deposit it back.
Then, make sure you have the ability to get a normal loan. If you win but don't close, you could loose the earnest money.
Third is determine a max amount that you'll never go over. This is very important, since at the heat of the moment, if you loose your cool, it could cost dearly. The auction is final, and we're talking about real money here. Also helpful is to find out what the bank wants. This is determined from the principle balance, plus the back interest, late fees and legal fees. It seems the previous owner has 2 loans, and this is the 1st loan foreclosing.
Forth is to see how the auction goes. There is normally a few regulars and more spectators. The auction goes very fast, if nobody wants to bid. Or it could go on for 5 or 10 minutes if there are a few bidders going back and forth.
On the auction day, with the cashier's check in hand, we arrived on site. Do not be late, otherwise the deal would be gone. There are other people, most obviously is a group of Korean. They had wanted to buy the house and flip.
The auctioneer announced the start of auction and checked all bidder's earnest money. He said the starting bid, to which nobody replied. So he reduced the amount. When he said 540, I gestured to bid. He than raised to 540 on behalf of the bank, which turned to 550-560-570-580. When he announced 590, I asked him to lower the increment to 5K, since I know it's close to what the bank wants. He bid again at 590, and the price went to 595-600-605. After 605, he didn't bid, so that's where the bank stops. The auctioneer asked around, nobody replied and I won the bid. After signing a few docs, we were on our way home. The Korean came to congratulate us.
After auction, I had to get mortgage. Out loan broker is very knowledge, but hasn't seen a contract as simple as one page. The auction result needs to be published in a newspaper for 3 consecutive weeks. It actually took more than 2 weeks for the result to work its way through the court office. Then 3 weeks of newspaper, then another several weeks in the court office. When it's finally rectified, it's almost 2 month later.
In the end, I had to pay interest on the entire balance (less earnest) at 8%, which is 8K for 2 month. Plus all closing costs. So the price is actually around 635K. This is an OK deal, but not a steal, it's more like saving the transaction commissions. From court paper, I also found out that I paid >3K extra to what the bank needed. Wish I had lower the increment further to 1K. Oh well, next time.
At the closing, our friendly loan broker was on hand to make sure the loan goes through without a glitch, and to observe his first foreclosure closing. The housing price has further dropped in the neighborhood, and close to what I have paid.
I think what makes this deal work is the existence of 2nd loan, which got wiped out. Without the 2nd loan, the previous owner would have been able to sell it at below market price, but still higher then the auction price.
Hope this helps people who are interested in buying foreclosure. Also hope people share their own stories, especially non-judicial process.
www.sunskitehomes.com
_:$
Hope it illustrates how the judicial process works. Looking forward to seeing a real life non-judicial story.
We fell in love with a house, which costs ~750K back in mid-late 2006. We visited the house on several occasions, first during open house, then with a Realtor. As priced, it's way beyond our price range, or comfortable price range. So we just kept an eye on it.
At the end of 06, the house was taken off MLS. Later we found out it was under contract for 740K, but didn't close because the buyer didn't get mortgage.
After the turn of 07, suddenly the house was found on foreclosure list, thanks to google.com. It was so shocking, since houses in such neighborhoods normally don't go to foreclosure. We followed the case closely. Even went to the auction site many times, just to see how it goes.
As the auction date drew close, we have several things to prepare. First, have the earnest money ready. It needs to be in cashier's check, about 10% of the expected sale price. The check would be made to yourself, in case you don't win and it'll be easy to deposit it back.
Then, make sure you have the ability to get a normal loan. If you win but don't close, you could loose the earnest money.
Third is determine a max amount that you'll never go over. This is very important, since at the heat of the moment, if you loose your cool, it could cost dearly. The auction is final, and we're talking about real money here. Also helpful is to find out what the bank wants. This is determined from the principle balance, plus the back interest, late fees and legal fees. It seems the previous owner has 2 loans, and this is the 1st loan foreclosing.
Forth is to see how the auction goes. There is normally a few regulars and more spectators. The auction goes very fast, if nobody wants to bid. Or it could go on for 5 or 10 minutes if there are a few bidders going back and forth.
On the auction day, with the cashier's check in hand, we arrived on site. Do not be late, otherwise the deal would be gone. There are other people, most obviously is a group of Korean. They had wanted to buy the house and flip.
The auctioneer announced the start of auction and checked all bidder's earnest money. He said the starting bid, to which nobody replied. So he reduced the amount. When he said 540, I gestured to bid. He than raised to 540 on behalf of the bank, which turned to 550-560-570-580. When he announced 590, I asked him to lower the increment to 5K, since I know it's close to what the bank wants. He bid again at 590, and the price went to 595-600-605. After 605, he didn't bid, so that's where the bank stops. The auctioneer asked around, nobody replied and I won the bid. After signing a few docs, we were on our way home. The Korean came to congratulate us.
After auction, I had to get mortgage. Out loan broker is very knowledge, but hasn't seen a contract as simple as one page. The auction result needs to be published in a newspaper for 3 consecutive weeks. It actually took more than 2 weeks for the result to work its way through the court office. Then 3 weeks of newspaper, then another several weeks in the court office. When it's finally rectified, it's almost 2 month later.
In the end, I had to pay interest on the entire balance (less earnest) at 8%, which is 8K for 2 month. Plus all closing costs. So the price is actually around 635K. This is an OK deal, but not a steal, it's more like saving the transaction commissions. From court paper, I also found out that I paid >3K extra to what the bank needed. Wish I had lower the increment further to 1K. Oh well, next time.
At the closing, our friendly loan broker was on hand to make sure the loan goes through without a glitch, and to observe his first foreclosure closing. The housing price has further dropped in the neighborhood, and close to what I have paid.
I think what makes this deal work is the existence of 2nd loan, which got wiped out. Without the 2nd loan, the previous owner would have been able to sell it at below market price, but still higher then the auction price.
Hope this helps people who are interested in buying foreclosure. Also hope people share their own stories, especially non-judicial process.
www.sunskitehomes.com
_:$
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