Промышленный лизинг Промышленный лизинг  Методички 

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a $100,000 equity position for the holder of the second if they could acquire the property in this manner. Unfortunately for him, we had done our homework and knew what was going on.

Who Conducts the Foreclosure Sale?

The foreclosure sale will be conducted by a trustee (usually from a title insurance company, but a private individual can also conduct the sale). The trustee will cry the sale for the benefit of those in attendance. The trustees cry (a description of the property to be sold) will be followed by a qualifying check of the bidders in attendance to verify that each has the ability to pay at least the opening bid.

The usual form of acceptable payment is cash or a cashiers check drawn on a California bank. The investor can find out in advance the trustees requirements by contacting the trustee the day prior to the sale. Sometimes you can negotiate with the trustee to come up with a percentage of the winning bid (see our discussion of IRS auctions in Chapter 12) at the foreclosure sale with the balance to be paid in 30 days.

When You Bid

Bring the amount you are willing to pay for the property and no more. Have the cashiers checks in various denominations so that you can provide the exact amount of your successful bid. Without the checks in various denominations, a refund of your excess money could take several weeks to receive.

It is of utmost importance that you do not share with anyone, or let anyone discover, how much money you have to bid on a property. This will weaken your chances for successful bidding because your competition can form a strategy to squeeze you out.

That is why we recommend you attend several foreclosure auctions to observe what goes on. It is not just important for you to watch the person conducting the foreclosure. It is also important for you to see how your competition operates.



Bidding Rings

You may discover that there is a bidding ring at your foreclosure sales. Although this may be illegal and unethical, you still must be prepared to encounter one. So much the better for you if a bidding ring does not exist.

A bidding ring conspires on who is going to get the winning bid. It works something like this. Three investors get together and agree on who is going to get what property. Investor 1 will get property A. Investor 2 will get property B. Investor 3 will get property C.

When property A comes up for bid, investor 2 and investor 3 will not bid against investor 1. However, if investor 1 is encountering competition from you or other investors, investor 2 and investor 3 may start bidding. They do this for one of two reasons.

The first reason is to try to force you out of the bidding. They do this by trying to make you think there is too much competition for the property, hoping you will back off and wait for another property.

Now, one of the three conspirators will have the bid just higher than yours that is the winning bid. If this is investor 2 or investor 3, they will defer to investor 1 and let investor 1 have the property.

The second reason is to try to bid up the price of the property and stick you with the winning bid. They try to get you so caught up in the frenzy and excitement of the bidding process that you lose your cool. When you lose your cool, you get auction fever. The bidding ring is trying to give you a lethal case of auction fever. We will talk about auction fever shortly.

The point is that once you have overbid on that first property, you may have taken yourself out of the game. Now you dont have the cash to bid on other properties coming up for sale. One and done. You are out of the bidding for the foreclosure sales for that month. That is exactly what the members of the bidding ring want to happen.

Even though you may be anxious to obtain the property, you must keep a poker face. Dont bid too early in the bidding.You will only drive up the price. We have found that in those circumstances where we waited until the hammer went down a second time before we made our first bid, we experienced success.



Auction Fever

Auction fever occurs when you bring more than one buyer into a buying situation. In the normal real estate-buying scenario only one buyer at a time is making an offer on a property. If there are multiple offers, the buyers are not together in the same place, so each buyers offer is unknown to the other buyers.

At a foreclosure auction all the buyers are compressed in one place at the same time. The bidding is out in the open. Every offer is instantly known to the other buyers. This can create a bidding frenzy. We have seen people at foreclosure auctions actually faint! They became so excited during the bidding process that they passed out.

Bidding can be like an intoxicant.To coin a phrase, You have to bid in moderation. If you notice you are coming down with auction fever, take deep breaths and stop bidding. We recommend you always take a friend or relative with you to protect against auction fever.

Buying at the Foreclosure Sale

Lets review something we first discussed in Chapter 3. Foreclosure sales are conducted at a public auction. The highest bidder gets the property. The seller at the foreclosure sale is a trustee or representative of the lender. So the sellers at the foreclosure sale are really auctioneers. They are professional sellers. Yet, they do not have any financial stake in the property.They are just doing their job.

Once it gets to the foreclosure sale, the owners are out of luck. If you have not been able to help them, or work out a purchase for their equity, the owners will lose all of their equity at the foreclosure sale.

It is true that the owners can bid at the foreclosure sale. But how will that be possible since you need to have cash to bid? If owners had the cash to bid, they would not be in foreclosure!

Credit Bid The opening bid is called a credit bid. The credit bid is put forward by the trustee, sheriff, or the representative of the lender. The credit bid is the total of the remaining loan balance, payments in default, and any costs associated with the foreclosure sale.

If no one bids above the credit bid, then the lender winds up owning the property. Any bid made above the credit bid has to be made in cash. Lets say the loan amount is $160,000 and the default amount is



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