How to Buy a REDC/Auction.Com Home in 5 Steps – Successfully!

First step – Hire a Real Estate Agent!  Disclaimer – I am a Real Estate Agent and took my clients thru one of these purchases.  Let me walk you thru this $&(* process and you will see why you need the assistance of a Real Estate Agent – like me!!  Did you know there can be 5 steps to this?  I certainly didn’t do this for the money, as you will see at the end!

First step is finding a home.  My clients and I started their homebuying process the standard way – we looked at numerous properties in numerous cities to find that “perfect” vacation home – or home away from heat 😀

We went from beach city to beach city, in their specific price range, and search criteria – walking distance to the beach, to downtown amenities, etc.  They also wanted a view if possible, and not a view of the rooftops or the neighbor next door.  We found a home, almost on the water with a fantastic view of the ocean………and a view of studs showing thru the wall, of a lot of holes in the drywall and electrical panels missing – get the picture so far??

Perfect!  Let’s place an offer says my clients.  I do the comps – the comparable sales in the area, what an appraiser will look at and since this is a bank owned (REO) property, how low a price we can come in with that the bank will accept since it needs a LOT of work.  We come up with a price and submit it to the listing agent only to get an email back a few days later that the home has been put in auction and we need to contact the auction co. 

Now starts the interesting process and I say interesting for the fact that I had never gone thru this and so was going to learn about it along with them.  My hubby and I had thought about going to one of these live REDC/Auction.com auctions a year or so ago, but after being stuck in the line just to get into the parking lot for 45 minutes, he said absolutely no way and we left.

2nd Step – Pre Auction – We submit an offer to the REDC/Auction.Com company, same price that was offered for the sale originally.  Wow, get an answer and some forms to start signing within a few days.  Clients have to send a cashier’s check and a personal check for deposit to equal 5% of the purchase price to escrow within 24 hrs of receiving this email.  Ok, this might a little too fast.  Well, they get it done and now we have to wait for “investor approval”.  Remember, this is a bank owned home and therefore no seller in the picture – just the bank/lienholder or the private investor.  They are allowed 15 days to accept or decline the offer.  We wait and wait and wait until day 14 and get told that the investor declined it, so “do they want to go to Online Auction in 2 days and see if they get it?”.  Not really, but ok, this really is a condo they want.  I tell them to register me as their agent when they are signing up online so that I can help them with this.  I knew at that point what my commission would be and it wasn’t a heck of a lot but it was a home my clients wanted and I was going to do my best for them, no matter what!

3rd Step – Online Auction -They register, wait for the auction to start (in fact, delayed their vacation so they could last out the 3 days), get their bid in with a start price that was WELL below our offer price.  I can’t access any of this, just know what is being told to me.  At day 3, I get an email and so do my clients that say their price was over the reserve price – Congratulations!!!  We assume (yes, I know exactly what that word means and really should never be used) that they have this condo – YAY!  Their price ended up being exactly the same as their original offer at the start.  Have to pay more to escrow within 24 hrs since the buyers premium now has been added in.  They do this and we know to wait.  Well, 10 days later, we all get told – AGAIN, that their offer was declined.  They are frustrated as am I.  The rep at the auction company told me that he had been talking with the investor to show him how he really should accept this offer, it wasn’t going to go higher, yada yada, to no avail.  LOL, I get a phone call to see if they want to attend the LIVE AUCTION that will be starting in approx 6 hrs to maybe get this home, again.  No, they do NOT want to come, it’s over and done, we are tired of it all.  The Live Auction would have been the 4th Step

5th  Step – Post Auction – Well, I get a phone call 2 days later to see if my clients are still interested in this home as it didn’t sell at auction.  What is their highest and best offer?  I told the rep that their offer, the same offer they started awhile ago was it, their highest and best.  And of course, I told him this without even seeing if they really did want it, what did they want their offer to be, I just wanted the rep to get something started.  My clients are so confused at this point, as am I, but what the heck, why not try one last time – and I had told the rep this was it, the final try, no more, we were all worn out.  Paperwork again, make sure same money is in escrow, and GO!

3 days later I get a packet of paperwork from escrow – ???  What exactly does this mean, this didn’t happen before.  It means the investor actually accepted the offer and we have 45 days to close an escrow.  I was surprised at 45 days, great news..  For those of you that have bought properties, you know that you generally have 10 – 17 days to meet all your contingencies such as appraisal and inspection.  An Auction purchase has no such thing – if you want an inspection, you have to do it prior to purchase, there is NO backing out.  My clients were made aware of this because they were working with me but I bet there are a lot of you who don’t read the fine print of an auction purchase but I sure did!

Now their lender has work to do to get the loan closed on time – do they want to do an inspection just for their knowledge since it’s too late to back out now?  No, they like to fix places up, so no problem.  We didn’t find any severe major damage (and I had also placed a call to HOA to see what had caused the problems in the first place and felt assured by what I was told), basically it was a lot of nasty cosmetic work.  I met the appraiser there armed with my comps and I knew they would be needed since this really was a unique property and the only true comparable was about 1/2 mile away with same view but completely upgraded, just gorgeous – and this one had holes in the walls.  I had to justify the approved really low price!  Guess I did a good job because it came in perfect, just what we needed. 

I handed off their keys and a nice bottle of champagne a few days ago and they are moving in this weekend.  We discovered beautiful, absolutely gorgeous, bamboo flooring under the ratty carpet when we tore it up – what a great discovery to go along with what I know is going to be perfect in a few months.  Oh, and yes, I did get some commission out of this whole thing – a whopping 1%, but wait, I didn’t actually get the 1% because of some stupid fees that the auction company kept and then my broker gets his split.  Yes, we agents do not get to keep all this commission that you think we all get.  We have to split it with both agents and then both of our brokerages get their splits too – Whoo hoooo,  by the time I get my check, I might be able to pay my cell phone and gas bill for all the expenses run up from this sale.  But you know what, it was a great learning experience – I can sit here and write about it – and my clients are very, very happy and have referred me to two other people – so all in all it was great.  Oh, and did I mention – the price my clients had to pay for this fantastic ocean view condo was $90,000 below original list price, and $125,000 below that comparable condo – and its not going to take anywhere near that amount to bring this condo up to that one!  Now, that truly is a “steal of a deal”……one that I’m hoping to find again for their lender and a few other people – LOL

Ok so I don’t take great pictures, but this was from inside their condo, from the living room window and the same view can be seen from their master bedroom window.  Sit on a couch or chair with that view and what could you want?  And as you can see, they are just steps to the water…..yes, this is what I’m calling a “steal of a deal” and they are far and few between.  So, call me if you would like help to purchase your own auction “deal”!!!