Foreclosure auctions - not what they are cracked up to be!

Like any other prospective buyer, I was elated at the deals being offered at some of the "auctions" being held on Las Vegas foreclosures the past couple of weeks. The starting bids were unbelievable - at those prices I could easily buy and flip properties in a heartbeat! I have been down to the courthouse steps many times, and I know how the process works there. But there I am up against other professionals that buy foreclosure properties for a living and you have to have cash the day of the sale for the full purchase price. Here they will actually allow financing and you have up to 21 days to close. This should be a breeze! Most of the bidders are first time home buyers or beginning investors.

Should I start with a small fixer upper in the southeast with over 1300 square feet with a minimum bid of $69,000? Or imagine, the minimum bid on a 2846 square foot home in Lake Las Vegas was only $299,000! Or I could perhaps go for the 4144 square foot home in Seven Hills, minimum bid only $359,000.

And I always wanted one of those gorgeous Las Vegas high rise condos in Turnbury Towers. One with 2809 square feet is going for a minimum bid of only $499,000 and I have seen them sell at over a million!

As a matter of fact there are over 300 absolute STEALS going on this next weekend during a two day auction of bank owned properties with prices ranging literally from the high $30,000 mark to about $600,000. Surely I can pick up at least one or two properties with my real estate savvy gleaned from more than 24 years of experience.

For two days I spend 12 hours at a stretch on my computer, feverishly running comparables for all 300+ properties, sorting the really good deals from the spectacular ones and establishing the maximum bid I will make on any one property. I even add in the 5% "buyer's fee" being charged by the auctioneers and adjust my final figures. After all, I am a professional and I won't get sucked up into a bidding war on any home or condo. This is strictly a business proposition for me.

I drive around and make sure the homes are in one piece and not backing up to a major arterial or gravel pit. I go to the bank and grab my cashier's checks. I think optimistically and get five checks figuring I might get really lucky and even pick up five properties. I have my auction book marked and ready to go. The auction is tomorrow and I have all the information I need to make intelligent choices.

So why am I not excited anymore?!! I have done all my homework thoroughly and I am much more experienced than 99% of the other buyers who will be bidding on the homes.

I am not excited because I found out there is a real "catch" to these low low prices. I found out by reading the "fine print" that even though I might have the winning bid on a property, that doesn't mean I will be able to buy it for that price. The banks have pre-established reserves on each home, and if that reserve has not been met by my bid, the bank doesn't have to sell it to me. After the auction, the banks will most likely counter offer the winning bids

In an "auction" conducted last August, 87 Las Vegas homes and condos were auctioned off. Only 38 closed escrow at an average of only 12% below market value. The rest went back on the market and actually ended up being listed lower - at about 21% below market value. And on top of that, the inexperienced buyers were charged the 5% buyer's premium. They probably could have waited three or four weeks and gotten the same homes for less money and had full agent representation.

"Bidder acknowledges that seller and auctioneer and their employees, agents, affiliates and associates reserve the right to place bids on properties up to the seller's reserve price, if desired, at their sole discretion." This is the other little glitch in the fine print. The auctioneers and banks actually have the right to bid against you during the auction process to drive up prices.

Last weekend there was an auction in Lake Las Vegas on another 200 homes and condos. Auctioneers quickly whipped the crowds up into a bidding frenzy. (They are even more effective with huge crowds where the enthusiasm is contagious.) Likely there will be a higher percentage accepted by the banks from that auction as more properties probably hit their reserve prices. But the buyers weren't the ones getting the deals.

These are not auctions - they are just glorified bidding wars and the real winner is the auction houses and the banks, not the unsuspecting buyers.

Am I going to go to this weekend's auctions? Yes, I am absolutely. I am going to see the bidding war in action and to hand out business cards to those who quickly become disillusioned with the process. Maybe they will perk up when I tell them to wait, that most of these properties will be on the market again in a few weeks. And that I can get them a better deal than they can get bidding against 2000 other buyers AND the banks themselves! Las Vegas real estate can be a tricky game, but there ARE ways to profit, in any market.