For those who were on vacation last week and are interested in trustee sales, we did an informative trilogy with Adam Rappoport. Click here to start at the beginning, and scroll up from there – and read the comments, Adam was very candid in responding numerous times!
At first glance it would seem crazy to take the additional risks when buying at the court house steps, and once you consider Adam’s thoughts, they might convince you further!
But here are the reasons you should consider buying at the trustee sales:
1. Less competition.
Adam and the other flippers are competing intensely over the cheaper homes they can turn and burn. For those who want to buy a house over $600,000, the competition thins out quickly – those properties are more risky for flippers, and most buyers don’t have the cash or guts to purchase off the ‘steps.
2. More selection.
On the MLS there are only 1,311 active detached listings of detached homes between Carlsbad and La Jolla. On foreclosureradar.com there are 3,951 properties in the same area (567 SFRs on the auction list, and another 3,384 on the NOD list).
3. No listing-agent involvement.
The listing agents are running interference for the sellers. The pricing is all over the map, they’re reluctant to provide any real help, and they leave the bidding open for days or weeks. As a result, you don’t know anything about the competition, if any. At the trustee sale, if there is competition, you’re looking them in the eye, and can walk away as a homeowner.
4. All homebuying is risky.
The risk seems more alarming when you hear that you aren’t guaranteed a tour or inspection of the house, and there could be undiscovered liens. A regular transaction has safeguards, but all houses are sold “as-is” without warranty – the only difference is that you’d have more people to sue if something went wrong on a regular sale.
As you’ve seen here I’ve been working on my own trustee-sale program for clients, where I help find the right properties, navigate the inspection/lien concerns, and help arrange for bridge financing.
I am being very deliberate in putting this together, and it’s coming along nicely. We are going to attempt 1-2 in December, and use video to help document the process so you can see how it works.
If you are in the $600,000+ price range and have at least 30% down payment (with a maximum loan amount of $697,500), then contact me for more details if you’d like to consider buying a house at the trustee sales!
If you think it sounds too risky, no problem, it is.
I don’t mind battling it out with you for those regular sales, and I think that’ll still be my primary service provided. But the activity doesn’t appear to be waning for the “quality” properties. Here’s a short-sale listing that looks fairly plain-jane in the photos:
Adam has been gracious in sharing his time and experience about buying at the court house steps, and flipping properties for profit, the least we can do is keep an eye out for him.
It’ll be easy to dismiss this one because of location, but this is where you’ll see the first signs of flips turning to flops – with the outliers:
The final installment of our three-part series with Adam Rappoport, talking about buying properties for cash at the trustee sales on the court house steps:
Here’s a guy who had poured his heart out for years on the blogs without obligation, just trying to help people. He deserves to be recognized as a team player first, then as a flipper showing the way:
Most of you know Adam as ‘SD Realtor’ from Piggington’s blog where he has been a valuable contributor for years.
He has been flipping properties this year, ones that he purchased at the court house steps. He was nice enough to share some of his thoughts and what he’s learned along the way.
When the trustee sale has no bidders, and the property goes ‘back to bene’, how does the bank perform in the open market? This is a review of the sixty Bank of America and forty of the Wells Fargo REO sales since September 1st:
When was the house purchased by the former owner?
2002 or before: 24
2003: 8
2004: 20
2005: 17
2006: 20
2007: 11
There are a number of long-time homeowners who are now renting or staying with family (more than half owned for at least 5 years!).
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Was it a purchase or refinance mortgage that was foreclosed?
Purchase: 42
Refinance: 58
Whether they knew it or not, 42% of the buyers were speculators. When things didn’t work out, they weren’t willing, or able, to endure.
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Of the 42 purchase loans that got foreclosed, when did they buy?
2004: 5
2005: 13
2006: 16
2007: 8
Those who purchased in 2004 and 2005 could have refinanced by fogging a mirror in 2006, but didn’t. Were they already underwater?
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Opening Bid vs. Eventual REO Sales Price
Sold REO for at least $100K more than OB: 5
Sold REO for $50,000 to $100,000 more than OB: 18
Sold REO within $50,000 of OB: 62
Sold REO for $50,000 to $100,000 less than OB: 5
Sold REO for at least $100,000 under OB: 10
Generally they are getting the opening bids pretty close to retail value. But if you are really good at flipping, there is excess opportunity if 23% of the ‘back-to-bene’ properties are selling for at least $50,000 more than the price you could have paid on the court house steps. Note that 15% sold for at least $50,000 under OB price too.
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Only six of the 100 were in our stretch from Carlsbad to La Jolla, and only two of those were houses (both in Carlsbad). There were a lot of condos and Chula Vista properties!
It seems like the more time that passes by, the better the selection gets.
Though the trustee sales present many hurdles, at least today you have one component availble – these are auction properties that have their opening bid out in the open:
This property in Bonsall is on the court house steps today.
Here is the MLS description from when it sold for $490,000 in 2002:
Working horse ranch, huge corral, 2 stalls w/shelter plus extra second corral and miles of trails nearby. Open floor plan that is mostly single level with a few steps up and down. Large balcony off home with spa. Land is fenced, mostly usuable – small fruit orchard. No garage but 900sf pad.
And it features my favorite street sign in the beginning!
