Phoenix Real Estate Auctions Explained: Part I

I thought the following post would be important and informative for home buyers here in the Phoenix real estate market who are wondering about the advantages and drawbacks to the real estate home auctions going on across the Valley. 

It’s important to break the real estate auctions into a few categories and then lift the hood to see how some of them work.  My experience has been that buyers who have not been to the home auctions such as that by REDC (US Home Auction), Zetabid, Williams & Williams, and others, really don’t know anything about how they operate and whether real deals can be obtained at these venues.

There’s a lot of information here so feel free to Contact Me for more questions. 

As well, if you want to get foreclosed property listings free via email for the Phoenix and Valley areas, just click the image below and we will get those to you. 

You can also search for foreclosed properties or all available properties by clicking the map below. 

Trustee’s Sale

The Trustee’s Sale represents the true foreclosure auction as this is the legal process by which the primary lienholder (who is owed on the property and pursuing retribution) is foreclosing on the home and will take permanent and legal possession of the property.  At the judicial foreclosure or Trustee’s Sale (this is more likely to be the chosen process), other parties have the opportunity to bid on the property but in most instances, the primary lienholder (lender) is the party to take final possession of the home. 

Investors and home buyers who want to take advantage of the fact that properties can be obtained at a substantial discount to anything on the market will need to be prepared to pay with cash.  As a result, most home buyers are not able to take advantage of these types of auctions.  Note: Some investors are purchasing these properties at the Trustee’s Sale, putting a small amount of money into reconditioning the property for resale, and then putting the properties back on the open market and selling at a substantial profit - this isn’t an approach for every investor though. 

Here’s a run-down of the positives and negatives of a Trustee’s Sale:

• Positives
  • Obtain a property at a sizable discount to anything on the open market. 
• Negatives
  • $10,000 cashier’s check is required at sign-in.  You will get this back if you don’t have a winning bid.
  • The remaining amount of the purchase must be paid no later than the next business day by 5pm.  Cash only.  No lender financing. 
  • Likely no opportunity to thoroughly inspect the property prior to purchase (unless it was previously on the open market before).
  • No opportunity to cancel the deal if issues are discovered with the property.  Once you own it, you own it.  Because of the short payment process here and likely limited access to the property, you really are buying a property you haven’t seen and inspected.  However, the deal here may or may not more than make up for that fact.  As such, visit the property and look through windows if you can.  Many homes that are heading to foreclosure are actually on the market as a short sale so take advantage of the opportunity to see the home up close before going to a Trustee’s Sale. 
  • Fast close.  Close will likely take place within a couple of weeks. 
  • You have to keep your intentions close to your chest and not share.  Other more professional bidders may be present and not content with your being there as a newcomer.  Don’t be intimidated but be aware of the personality dynamics that may be present and play out during your bidding process.
  • No legal recourse upon sale. 
  • Efforts will be made to identify any IRS or other liens on the property.  Be sure any liens are identified through the process.

Many properties here will go to the lender that has the lien for them.  And many of these will go to the open market for sale at a later date or handled through one of the auctions performed below.  However, the majority (80% of remarketed foreclosed properties in my estimation) will go through the normal resale process through a Realtor. 

 The “Marketing Auction”

For lack of any better term here, I will call this type of real estate auction the “Marketing Auction.”  With the marketing auction, an auction company is trying to auction properties that are currently on the open market for sale through a Realtor and get sellers to sign up to have the company auction the property.

The company’s representatives will call Realtors like me to find out if any of my sellers would be interested in putting their property up for auction.  The catch is that the seller would have to pay anywhere from $1,500 to $2,500 to list their property for auction.  In effect, the auction company is marketing the property for sale through their bidding process.  The seller pays no matter what happens.  Reportedly, a high percentage of the properties auctioned this way never close.  So, the homeowner takes a substantial risk to try to sell their property this way and will pay a premium to attempt it. 

Overall, I don’t find this approach compelling and I don’t believe many other Realtors have either. 

Check out Phoenix Real Estate Auctions Explained Part II for insights on Phoenix Foreclosed Home Auctions including US Home Auction and Zetabid.

Email this Post

Tagged as: home auction terms and conditions, lender foreclosed property auction, phoenix foreclosed home auction, phoenix foreclosed homes, phoenix foreclosures, REDC, US Home Auction, williams & williams, zetabid