Archive for March, 2006

Salt Lake County Trustees’ Sales (a.k.a. foreclosure auctions) are held at the Third District County Courthouse in Salt Lake City, Utah inside the rotunda (see below). Auctions are commonly scheduled Mon-Fri at 10:15 AM, 10:30 AM, 11:30 AM and 5:00 PM.

In order to bid you need to bring a Cashier’s Check for $5,000.00 made out to yourself for two reasons: 1) if you don’t use it, you can deposit it in your bank and 2) if you do use it, you can write “Pay to the order of” on the back of it and sign it over to anyone you like. In this case, it is the name of the foreclosing attorney.

The remaining balance is due by 12:00 PM the next day so most people use cash or hard money to purchase these homes. However, I have heard rumors that Tom Lakey of Aspen Home Loans has worked out a mortgage loan program with our local Mountain America Credit Union to finance auction winners.

On average there are about 20-30 people bidding on properties (see below) and almost all of them are experienced investors. Some have been buying at auctions for as many as 10 years or more. I was surprised to find NONE of them go to our local real estate investors associations WAREIA or SLREIA.

Since Notice of Trustees Sale are required to be recorded against the property and published in The Record, which is a local legal newspaper in limited circulation, many of them had lists of the auctions for that day mixed in with data such as opening bid which can be readily obtained by contacting the foreclosing attorney’s office with a file/case/trustee number.

Of course, they have their secretaries compile this information daily while they attempt to drive by the home for an exterior inspection, and offer to help the homeowner by purchasing the home directly from them for what the owe or by negotiating a short sale and thereby getting access to the interior for inspection and eliminating the competition of an auction.

Sometimes, when the house is vacant, investors have been known to cut screens and go through windows or kick-in doors as a last resort effort to see what kind of condition the home is in before bidding at the auction. Some investors will indirectly admit to the fact and justify as moral gray area because 1) the homeowner has abandoned it and 2) the bank doesn’t own it yet so 3) nobody is around to call the police.

The house I was going to bid on was worth $370 in Cottonwood 84121 (great middle/upper-class area experiencing high appreciation) and had at least $200k in equity. The foreclosing lender would have had an opening bid of somewhere around $180k. (see below)

As is often the case, I called 3 hours ahead to confirm the auction was still a go and the foreclosing attorney’s secretary confirmed that it was, but when time for the auction came it was announced as having been cancelled (most likely due to last-minute bankruptcy or reinstatement).

I was surprised to see how many foreclosures were happening in Magna which is about one of the worst cities in Salt Lake County and well-reknown for its terrible water even though there is worse water in places like Sandy.

It was interesting to listen to bids. I had my notebook with me so I was able to quickly jot down the sequence of bidding on a particular property in Magna. There were only two bidders and seeing their interest made me wonder what’s out there? I might have to drive by the property to see, but here’s how it went:

Auctioneer:

klausen property – 5258 s rome indy park unit #185 in magna (or something like that)

sale held pursuant to deed of trust held by settlor aka. homeowner
recorded by trustee aka. mortgage servicer or title company
beneficiary is beneficiary aka. foreclosing lender
opening bid is $79,364.35

One man raises his finger above his shoulder.

Auctioneer:

opening bid taken as a dollar over
do i have any other bids?

Bid increments:

1 dollar over
100 dollars over
$79,500
$79,600
$79,700
$79,800
$79,900
$80,000
$80,100
$80,200
$80,300
$80,500
$80,600
$81,000
$82,000
$82,100
$82,200
$82,300
$82,400
$82,500
$82,700
$82,800

Auctioneer:

going once, twice, SOLD!

Notice the variation in the bid increments. They start at a dollar. Who knows? If nobody else wants it, why pay any more? A smart move and also a well-known classic; notice how the auctioneer immediately assumes it. As a novice bidder participating in a live auction you may think that it is smart to listen carefully to the bid increments, and get a feel for your opponent’s threshold as the bid increments are said with more hesitency and with lesser amounts.

Yet they bid at 100, then 300, then 100, then 400, then 100… trying to throw each other off. There is no hesitency and no excitement–it’s almost as if they’re using a bidding metronome to keep pace and monotone voice with a poker face to match.

Finally he bidding ends abruptly at $82,000 and the losing bidder takes his leave signaling that he was obviously waiting for only that one property. Everyone else stays until the bidding is over and some are friendly enough to talk with me, an obvious newcomer since 99% of them do this every single day.

I was delighted to exchange business cards and receive offers for hard money, deal partnering, etc.

I was disappointed to see that one or two had a negative attitude toward newcomers–seeing them only as competition and trying to tell me scary stories about how there’s no deals and all the bad deals they’ve gotten–hoping to scare me away.