More and more newcomers are participating in auctions of properties from foreclosure listings across the country as home prices and opening bids at foreclosure auctions fall to low levels.
In King County, Washington, 37-year-old Rock Harrison was one of almost 40 people who gathered just outside a strip mall in the area for a public auction of homes included in the county’s foreclosure listings. Harrison is new to auctions but had himself pre-qualified for the auction of a McMansion house in Auburn, which was priced at $470,450 in 2004 and was being auctioned at a starting price of $267,000. Several newcomers have participated because they saw that the house was vacant and satisfactorily maintained. The bidding quickly jumped to $320,000 at which point Harrison dropped out. The property was sold at the final price of $371,000, still much below its 2004 price.
Rick Sharga, a top executive of foreclosure tracking firm RealtyTrac, said the demographics of residential foreclosure listings and auctions have been changing. Foreclosure listings have been in the housing market ever since, but nowhere near the level of foreclosure listings nowadays which have instigated about 60 percent of homebuyers to look for foreclosure properties when looking for a house to buy.
RealtyTrac has predicted that up to three million homes will be included in foreclosure listings by the end of 2009 if no intervention is implemented on a national level. The tracking firm monitors pre-foreclosure sales or short sales, trustee’s sales or public auctions by counties and sales of real-estate owned properties.
Sharga also said that the sale of foreclosed properties to third parties has declined, increasing the proportion of foreclosure properties being acquired back by mortgage banks. In California, only 3.6 percent of nearly 250,000 properties in foreclosure listings were sold at trustee auction sales to third parties.
New York City investor Duane Harden is advising auction newcomers to do research on foreclosure listings before the properties are auctioned. They should also know state rules on foreclosure auctions. In New York, the winning bidder must immediately pay ten percent of the bid and complete the payment within 30 or 45 days. In Washington State, the bidder must pay immediately the full winning price with a cashier’s check or cash.
Sharga and other foreclosure auction specialists are advising newcomers to study foreclosures and the real estate auction process before actively participating in foreclosure auctions. They said that although many have earned profits from foreclosure auctions, there are a lot more who have lost their money in bidding for properties that turned out to be lemons.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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