Real Estate Tycoon
A unit near ours went on the auction block today. The owners had taken out a reverse mortgage at the height of the market in 2006, but they’re both now in nursing homes and in accordance with the terms, the place being vacant for over a year, it reverted to the mortgage holder. We knew what the property was worth and what would need to be done to it, and decided to take a flyer. Worst case, the required $10,000 deposit would go straight back to the bank. Best case, we could have a rental property.
The auction began at 11:00 a.m. sharp. A half-dozen or so people in expensive cars holding their cell phones in front of them like shields arrived just before it began. There was the obligatory reading of the notice, and the notification that along with any liens due to the condo trust (I knew that number) and to the town (not sure about that one, probably two to four thousand in taxes and water), there was also a lien of unknown size owed to the IRS for which the winning bidder would be responsible.
Then the bidding began … at $250,000, a good $70,000 more than the place was worth and a LOT more than we were prepared to offer, and that’s not even considering the liens. It sold for $252,000. So far as I could tell, there was only a single bidder, everyone else kept their hands in their pockets. The whole thing was over in less than five minutes, and most of that was the auctioneer reading boilerplate.
The winning bidder? The bank. They’ll turn around and list it for sale. Apparently $252,000 is about what is owed to them. While the bank may be able to finesse the liens, they're going to be hard pressed to make a profit on an "as-is" property.
So we found out how real estate auctions work. Maybe the folks in the expensive cars have figured out how to make a fortune at it, but it seems a dicey business at best. I knew we should have taken that Trump University course...
The Unindicted Co-Conspirator says that the next time we want a flutter, all we have to do is take ten grand out of the bank and put it back in again.