Last night I attended a great presentation of a foreclosure auction service here in the Seattle/Bellevue area.
The web site is www.foreclosuresolutionsnw.com
They lend hard money with an easy conversion to a fixed rate mortgage for 15% down you can own a property. The hard money costs you 4% loan origination, plus 12% interest. If you cash out the loan in three months they will rebate 2% of the loan fee. All in all it was avery good deal.
They charge a 3% commission for anything you buy at auction through them and they have a great resource for tracking the properties. They also drive by the properties before the auction date. They are actually taking most of the usual difficulties of buying at auction out of the equation.
Now there is a reason why we haven’t addressed auctions here, but the time is right. There are too many foreclosed properties to ignore.
First, the bank determines the auction price. They take what they are owed, plus fees, then set a price for auction. If there was equity most times some one would buy the property before the auction as a ”short sale.” That’s where the bank accepts less than what is owed. Higher equities are bought for the value. Most distressed seller with equity can get out.
The per centage the foreclosure group was quoting was 73% of fair market value. Given a discount of 25% for the amount of work a foreclosure is that doesn’t seem like a very good return. Now with this computer, web site system in place it makes it a lot more cost effective. The other thing today is that there are so many foreclosures the banks need to make the properties more attractive to cash strapped investors. Banks are much more willing to let go of fees, or even sell for a discount when so many properties are going to auction.
What I have traded in is REO or Real Estate Owned properties. These are properties the bank couldn’t sell at auction and returned them to regular inventory with a Real Estate agent. Did I mention you have to pay cash at auction? You do have to have all cash or cahiers checks at the auction. That is where the 15% down payment for hard money makes more sense. REOs are eligible for bank financing.
In the past there were some bank owned properties that would get discounted until they sold. Now we see hundreds that sit on the market. Price reductions for what was a distressed property are competing with properties that are owner cared for. With all the properties thrown together even the very cheap below market government owned houses that used to get bid up are taking longer to sell and in some cases require price reductions.
Just to recap, there are plenty of properties to chose from today. More are added daily. Real Estate agents, banks, and Investor groups are dumping properties on the market. Many people aren’t getting the value of the properties. As I’ve pointed out before there is a wholesale price for every property you see. People want to have hope that the market will turn around, but it’s like an ocean liner. Just because we had a quick run up in pricing doesn’t make that a standard.
This type of market is where I got my start turning properties. In a depreciating market place every day you are losing money if a property does not sell. You want to turn it and burn it, quickly. You buy and sell for cheap. You need to sell below market value. Your costs have to be very tight and you need to get the place done quickly. You can’t do it all yourself, you have to let other people help you. You need volume to make the numbers work.
