I recently have had clients ask me why the properties going back to the lender had such a low opening bid. Upon doing some research and speaking with some different experts, we have concluded that there is apparently some financial, insurance or accounting gain for a lender to start with a low opening bid on some of the transactions. Even when they plan on bidding the property up to a higher amount.
Example:
House Market value $300,000
Value to lender $285,000
Loan amount due and showing as opening bid $325,000
Actual Opening bid at auction $175,000
If there are bidders at the at the auction the bank will often bid the property up to their DETERMINED value amount of $285,000. If there are no bidders it appears to go back to the lender at the low amount of $175,000.
Don't be fooled. The banks aren't letting these properties go for nothing.
And as I have stated before, buying at auction is the most dangerous purchase in real estate that I have seen and I DO NOT recommend it.
On the positive side we have been having great success with short sales. It appears these departments are getting organized and realistic offers are being excepted and are going through. Our escrow officers have really worked out a great process to have a successful short sale close.
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