Over the past six months or so, I have noticed an increase in the ads in the paper about auctioning homes. Here in the state of North Carolina, you must list your auctioneer license number in the advertisements and the property owner along with the terms of the sale. When I don’t see this in the ad, I get suspicious.
Upon further investigation of these ads, I have found two things happening. First of all, there is an investor or group of investors that claim they own the home by way of a deed BUT they do not own the debt (the mortgage), that is, they took over the property “subject to” the existing mortgage.
In most cases these are homes they are about to be foreclosed. The homeowner has throw up his or her hands and have basically given up trying to stay in the home. They deeded the property over to the investor(s) with the understanding that the investor will stop the foreclosure, buy their home or get the property sold and save their credit.
In the meantime, the investor(s) work out a “short sale” with the lender. The investor(s) then try and find an end buyer to sell the home to, at a higher price than the “short sale” offer. Part of the marketing plan is to “auction” the home to the highest bidder by way of what I call a Dutch action or round robin bidding process.
Potential buyers come and look at the home and write an offer down on a list provided by the investor(s) along with their phone number. The bidding process stays open for several hours then closes. The investor(s) call everyone on the list after the bidding process closes and tells them what the highest bid was and wants to know if they want to increase their bid. A few will, most don’t.
If the highest bid does not meet what the investor(s) need or want out of the house, there is no sale, and it basically goes back to the bank through a foreclosure. The homeowner’s credit is ruined.
The second thing I see happening is that realtors are advertising a property as an auction using a form of the silent auction method. A potential buyer makes an offer through a sealed bid. The bid process may stay open for several days. Again, as in the investor group above, if the bid does not meet expectation, there is no sale.
As a professional auctioneer, I question the legality of some of these selling methods that are being advertised as “auctions.” If you are approached about selling your home via an auction, ask that person if he or she is a licensed auctioneer,(not all states require a license) a member of the National Association of Auctioneers [NAA] and/or a member of their state auctioneer organization and about their experience in the auction business. They should also be licensed to sell real estate.
For more information on real estate auctions, go to my website at www.canSellnow.com or call me with your questions at 252-257-4822.