Auctions; are you a novice? Then you shouldn't be bidding. I heard about a recently that there was a real estate auction in Fort Myers at Harbourside. I also heard that property went for more than it is worth. Auctions are renowned for that. You had better know your product and know for certain what leans are against it. It is still not for the faint of heart. everyone I know has been been burned on at least one.
Lenders buy them back so they can maximise what they might get back on a loan. Today's News Press has a great article. Here is a portion of it.
"Most of the properties auctioned these days are simply taken back by the lender if nobody else’s bid reaches the minimum the lender is willing to accept.
As a result, more and more homes are ending up owned by the bank: 838 homes by the end of 2007, or 0.4 percent of the total in Lee County, according to San Francisco-based First American CoreLogic Inc.
Back in the heady days of the real estate boom that ended in late 2005, there were buyers aplenty at the auction, said David Hall, president of First Community Bank of Southwest Florida.
“They were buying into a buying frenzy,” he said. “There were not that many for sale.”
But now there’s a glut of homes on the market, Hall said. “There’s just so much property out there.”
Banks generally are setting the minimum winning bid at far above the real market price of the houses, said Jeff Tumbarello, a mortgage broker and investor who sometimes participates in the auction.
“A lot of them are now lower than the judgment but not significantly lower to get someone off the fence,” he said.
As a result, a small group of experienced bidders dominates the auctions, and they tend to like it that way.
“This is my type of market,” said Thomas Bruzzesi of Thomas Realty & Investments, who has been a real estate investor since 1989. “Everybody’s hibernating. They’re not educated for this market.”
At a recent auction with about a dozen people in attendance, an obvious novice made a $20,000 bid on a condominium being taken back by a bank. Bruzzesi quickly bid the price up to $80,000 — out of range for the wannabe hoping to get a steal. The bank bought it back with the next bid at $81,000.
Bruzzesi said he was just saving everybody a lot of time. He already knew the bank was never going to let the condo go at anything close to market price so there was no point in a long, involved bidding war.
“We call Tom ‘The Maniac,’” chuckled his competitor, Charles Cosby of The Foreclosure Team Inc., after the auction, and Bruzzesi happily admitted he’s ultra-competitive.
Cosby, a quiet, constantly smiling man, is known as “The Whisperer” because of his low-key manner.
He gently warned a woman watching the auction and considering making a bid that it’s not a game for the fainthearted or unprepared.
“I’d never advise a normal person to come here as a hobby,” Cosby said. “To walk up here without a lot of experience is dangerous.”
Bruzzesi explained that to bid intelligently, you must know what other debts are secured by the property.
He once watched an inexperienced bidder triumphantly pick up a house for $12,000 and later realize to his chagrin that there was also a $168,000 mortgage on it — the bidder’s money was down the drain.
Missing a mortgage while checking court records is the easiest thing in the world, even for the experienced, Bruzzesi said. “You can have something as simple as missing a unit number,” he said.
Even when the bidder gets clear title, there are no guarantees about the condition of the property or zoning issues.
As a result, the regulars are loath to buy anything without looking at it, although occasionally a deal comes along that’s too good to pass up.
John Carney of Carney Properties & Investment Group, for example, said he almost never buys sight unseen but took a chance a few years ago when he could pick up a 5,500-square-foot house in a rundown east Fort Myers neighborhood for only $18,000.
When he walked into the house, he quickly realized why it went so cheap: “It needed $120,000” to fix it up, Carney said.
Carney eventually sold the house for more than $200,000 and made money on the deal, but it was a three-year project because there were few potential buyers for its only practical use as a day-care center.
The other regulars nodded in sympathy: All had been there and done that.
Although the people who come to the auctions don’t recommend amateurs participate, they all acknowledge that looky-loos are a great source of potential buyers.
One recent attendee was Kim Hardin, a real estate agent with Century 21 Sunbelt Realty # 1.
She didn’t bid on any properties but was interested in buying foreclosed houses from the regulars.
Hardin said she’s looking to buy in bulk for clients interested in holding houses and leasing them out.
But that could be difficult, Carney said. “We can’t get the houses” in large numbers from the banks.
Ed Bonkowski, a Fort Myers-based real estate broker, did a lot of business in foreclosed properties in the early ’90s in the last major downturn but said he hasn’t lately because good deals are “few and far between.”
He expects that will change eventually, as foreclosure sales accelerate and bank-owned homes pile up.
“Our decision to buy’s going to be when the banks are ready to bulk sale a bunch of them, then it’d make some sense,” Bonkowski said.
But prices will have to drop steeply for that to happen, he said.
“At 15 cents on the dollar, all those properties will be gobbled up, investors will come out of the woodwork and buy them and everybody will go back to work,” Bonkowski said.
- Dick Hogan"