Thursday, January 24, 2008

Over 2,000 bank owned homes to be auctioned off in California starting this weekend (Jan 26 - Feb 24)




It appears that REDC (US Home Auctions) is going to be quite busy this month and earning some nice commissions (5% “Buyers Premium”). If you visit their site and click on an area, there is a detailed break down on all the homes being offered and an option to download them to an excel file. REDC also lists what the previous REO asking prices were. Adding up that column comes up to about $650 million worth of REO that "MUST BE SOLD" in one month (11 auctions). Lenders are now in liquidation mode as foreclosures continue to climb. (Dataquick: California Foreclosure Activity Still Rising)

While obvious that we still haven't hit the "bottom" yet as far as home prices are concerned, and according to a Merrill Lynch report, home prices will drop another 15 percent this year, and declines will continue in 2009. The unknown is just how serious will the upcoming recession be? The FED is in full battle now in fighting against a monstrous deflationary force caused from the collapse of the housing bubble.

Should I buy yet? It really depends on your area. Real estate is local to a greater extent, just make sure you get a good deal, and by that I mean a very good deal. If you can negotiate a good price and intend to live there, I'm guessing you should be okay (yes, i did say guessing). Mortgage rates are at a 2 year low and expected to come down even further. This will make a difference and will bring in a lot of people who were on the sidelines back into the market. Okay, I'm starting to sound like a Realtor(TM) now. Simply put, I don't believe you should put your life on hold waiting for the absolute bottom and in some areas it may not turn out as you expect.

Be sure to do your homework and figure out what a property would rent for and and compare that to what your monthly mortgage payments would be. Here's a calculator from the New York Times and another one from the Center for Economic and Policy Research (2005). If you are looking to buy and flip a house, then be sure to check out one of my favorite sites on flipping houses. Good Luck to all those attending the auctions and be very careful on how you bid.


Update: (And thanks Bubble Sitter for posting this)

US Home Auctions allow SHILL BIDDING. The quote below is right out if their brochure (and this is the second time I have posted this quote on your web site):”

“On page 122 paragraph 3, I quote verbatim: ‘Except where prohibited by law, the Auctioneer may open bidding on any property by placing a bid on behalf of the Seller and may further bid on behalf of the Seller, up to the amount of the reserve price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders.’”

“Your advice to be very careful is right on the mark. US Home Auctions wants to get the bidding going and get people invested in time and effort, then PUMP THEM UP!”

“BE CAREFUL INDEED.”



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20 comments:

Cal Housing Bear said...

I agree with the thought if you can get a good deal and you plan a long long term view of owning.

However, using the rent to price calculator link, it is clear to me that renting in three areas of CA still is much much much much cheaper.

According to the caculator, I am saving about 6k a month by renting.

Dimitris said...

I posted another link to a calculator from the New York Times.

I didn't realize the first calculator is a bit outdated (2005 ).

Well it's still much cheaper to rent, that's a given. But, you can find good deals now as it was impossible to do before.

I think the point I was trying to make and didn't quite come out the way I wanted it to was that if you find a real bargain, than that "bargain"(being a bit sarcastic here) isn't really going to go down much further. The calculator is taking into account all existing overpriced homes. If you find a home at a very good price, and I mean very good price, then you can safely add yearly appreciation of at least 1% on the calculator - then the difference won't be all too bad.

That's my thinking at least.

REO said...

With interest rates as ridiculously low as they are, you can't go wrong with housing if you get a great deal on a foreclosure auction.

Dimitris said...

REO,

Homes are still overpriced and that goes for a lot of REO's as well. My thinking is that if you intend to live in that house, then you should be o.k. as long as you got a great deal and you qualify for today's low rates.

You're probably still better off renting for the time being as home prices will continue to come down (again location matters). But, if you find a house you could call home - then proceed with caution. Don't expect prices to come back up for at least 5 years. The RE game is over. Regulators will be wide awake this time to prevent another housing bubble from happening again.

I think the Fed rate cuts are going to help us find a bottom a lot quicker than most realize, of which, the bubble will deflate in real terms rather than nominal (as the dollar continues to lose value). I also think that slow growth/recession (weak demand) should keep inflation under control for the time being.

Anonymous said...

We are years away from a bottom. These auctions are for fools. Many of the homes have high reserves and you can do much better going out and negotiating your own deal on the open market. Auctioneers hope you are dumb enough to get caught up in the hype.

Bubble Sitter said...

Dimitris,

US Home Auctions allow SHILL BIDDING. The quote below is right out if their brochure (and this is the second time I have posted this quote on your web site):

On page 122 paragraph 3, I quote verbatim: "Except where prohibited by law, the Auctioneer may open bidding on any property by placing a bid on behalf of the Seller and may further bid on behalf of the Seller, up to the amount of the reserve price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders."

Your advice to be very careful is right on the mark. US Home Auctions wants to get the bidding going and get people invested in time and effort, then PUMP THEM UP!

BE CAREFUL INDEED.

Dimitris said...

Bubble Sitter,

Thanks. I feel I should post that on the front page. Hopefully we can save a few souls.

Ben Bittrolff said...

Bottom Line: The average Joe six pack is a baby boomer quickly running out of time. His single largest asset, his primary residence, is deflating rapidly. This single largest asset is also the primary collateral for his single largest liability. His balance sheet is rapidly deflating as all his assets, from his home to his equity portfolio, all simultaneously deflate while his debt outstanding may actually still be increasing. His debt servicing are costs not dropping, despite aggressive rate cuts, and may actually be rising. It has also become damn near impossible to refinance certain mortgages as easy credit evaporates. On top of that, Joe six pack should now be seriously concerned about his job security. So when a cheque for $300 to $1500 arrives in the mail, Joe six pack is not going to spend it on a $200 steak dinner or a new computer or on a vacation. Got it people?

More on the stimulous package: (http://benbittrolff.blogspot.com/2008/01/fact-sheet-bush-stimulous-package.html)

TheFinancialNinja

Anonymous said...

I wouldn't bid at a REDC auction, I'd go bet on the ponies first, less risky. You are buying someone elses problem or a home someone abused in most all cases. They guarantee a clean title but what does that really mean? How many people are actually paying for a home inspection or having surveys done by engineers to insure clean title? Title insurance insures the lender, not the borrower.

REDC is notorious for the 20 day phonecall(check the web for REDC problems). On day 20 they call to tell you the bank didn't accept your offer but feel free to bid again or lose your upfront money. Just because you win the auction that doesn't mean you'll get the house, they are notorious for jacking later on and holding your money hostage per web reports. I tracked a few of the recent auctions and the prices that appeared in county records ended up 4-5% higher than the closing price at auction......aka, business as usual apparently.

County records show many of these people bought homes at 10% off bubble peaks. They relenquish all legal rights as it is an "as is" auction and in the process just set themselves up for future financial disaster.

Unless it's 50% off a recent legit value, it's not worth the risk. Don't fall for the legal shill bidders either.

Robert said...

I went to the auction in Anaheim on Saturday and it was crazy. There were about 5000 people there and the bids were going through the roof. Some people thought they were getting some good deals but I can still see the market dropping here in Southern California. I was going to bid for a house in Anaheim that had 1800 square feet, needed a lot of work and had termites. This property went for 350,000, while homes in Corona that were previously valued at one million dollars went for 670,000. There are more auctions coming and maybe a deal will pop up then.

imanauctioneer said...

I just attended the REDC auction at Sun City AZ and as an auctioneer myself I considered it shameful. Blasting music for no purpose but to disorient people. Bids went through the roof. One property after another was "re-sold". One re-sold 3 times before I got disgusted and left. When a worthless ghetto property I had inspected "sold" for as much as desirable properties, it became obvious the "sales" were fake.

The game seems to be calling sham bids and sham sales until some sucker is seduced to make a REAL bid. If that REAL bid is over the secret reserve, that sucker is stuck with the deal. This so-called auction is loaded against the buyer.

Weeks after the AZ auction, REDC is trying on April 2 to "re-sell" 370+ properties that have "come back on the auction block". Yeah right!

REDC runs a shameless scam. I don't think their disclaimer that the auctioneer can bid for the seller relieves them from the fraudulent nature of these auctions. I would like to see some Attorneys General take an interest because these so_called auctions are misleading vulnerable people. Only vulnerable people will be taken in by this dog and pony show. An investor will not be fooled.

Stay away from REDC Auctions. Not only will you NOT find a good deal, you will be assaulted by deafening noise and have your time wasted.

Anonymous said...

Thanks imanauctioneer ! It is what I suspected.

Anonymous said...

Thanks imanauctioneer it is what I expected as well!

Anonymous said...

I attended and purchased a home at REDC auction and it was a disaster from the start! First, they held my deposit for over 2 months and would not respond to phone calls for emails for weeks. They lied about the square footage and previous value of the house and then claimed "i should have done my own research". The agents for auction properties are not working for buyer who is getting house from auction so it's useless to try to get help and my agent was not paid commission by them because she did not sign in at the open house although she was there with me and agent didnt know she should sign in, I also think they have people bidding to jack up prices because people seemed to be paying much higher for homes than regular market prices. On top of all this, the auctioneer is hard as hell to understand

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Anonymous said...

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Tony Falasca said...

Countrywide Please contact me Tony Falasca I can buy alot of homes if they are 55%LTV or lower!!

Anyone else also I buy Vacant homes everyday!

http://www.USAHomeBuyersExpress.comhttp://www.USAHomeSellersExpress.com

George said...

I thought Countrywide was out of business or at least been sold to Bank of America. Therefore, who really own these properties? I was also wondering how often do you update this list? This list gives you the actual address for free while the other list charge. Great work.

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