I went to a foreclosure auction today, expecting all the fun and excitements of an auction. Instead what I found was a roomful of agents representing attorneys. The auction went like this and I am paraphrasing.
“How much does the borrower owe the bank?” – court
“250 thousand” – rep
“Going once, twice, three times, sold to the plaintiff.” – court
All but maybe one or two foreclosure listing got put back to the banks. LTV on the loans were probably too high on most of those loans to begin with, so when they finally go to auction, many of these loans had balances higher than the assessed values of the properties.
Some properties had reasonably low unpaid balance when compared to the assessed values, but still no investors there bid on them. It seemed to me that they will wait for the banks to REO the property at the Final Judgement price and then try to get the property off the banks.
In short, the diamond in the rough analogy is true here. So really one should go to agents specializing in REO to see how high of a low-ball offer REO departments are willing to accept. A few quick phone calls to local agents landed me zero information since they are in the business of getting as much for the property as possible. But in this environment, I think most investors are willing to sit and wait for the asking prices to come down.