So picking up from yesterday’s blog about the tips and traps of buying property on auction, today’s article continues AFTER the documents have been signed and Escrow is opened.
Bear in mind that to bid on the REDC auction, one has to arrive with a cashiers check for $5,000 to open Escrow on the first property, $10,000 for the second property, $15,000 for the third property etc. We attended the auction, carrying cashiers checks to the tune of $30,000, planning on buying 3 properties.
One of the clauses I warned readers about is the one that binds you to NOT visit the property until Title has been passed to you – ie, AFTER close of Escrow. During Escrow, the property legally still belongs to the lender. Let’s not forget that all property purchased on auction, is bought ‘As Is’! Most people consider this to mean that the property is a ‘fixer’ and certainly in our case, the repairs were only cosmetic.
We decided to do a drive-by of the two properties we bought (both in the same area) as only my husband had seen the residential complexes – we had no intention of entering the properties. Upon our arrival, we noticed a man exiting the property and pulling the door closed behind him. As the agents sign and the auction sign were laying flat on the ground, I asked the man if he was the agent. He said that he was a prospective buyer, having been sent to preview the property by his wife. He was carrying a REDC auction book.
I thought this was strange! Why would REDC include a property, now in Escrow, on their forthcoming auction, which is only due to be held in July? As the man disappeared down the road, we noticed that the front door was not closed and we approached. The property had been broken into and the door frame was nothing but splintered match wood. As we peeked into the living area, a really bad smell became evident, empty alcohol bottles were strewn around the floor, the carpet was pulled up in various places and human feces were visible in several places on the carpet and floor!
Yuck! Upon further investigation, it was obvious that the utilities had been turned off, because the toilet was blocked with unflushed feces. A foam bed roll was in one of the bedrooms and the other bedroom boasted MANY cigarette ends on the carpet and used condoms on the floor of the closet! The wash hand basin in the vanity area was heavily laden with loose tobacco.
This is the property that we bought FOR CASH and are bound NOT to enter till close of Escrow! NOW WE KNOW WHY! As the properties are purchased ‘As Is’, and the buyer is not permitted to enter the property till close of Escrow, the lender can claim that the property was in this disgusting state at time of signature! (Note: If you plan on buying property on auction, PHOTOGRAPH every room and the exterior, on the day that you preview.)
Like I said in yesterday’s article, the purchase contract is not approved by CAR (California Association of REALTORS(R)) and there is NO protection for the buyer. Like many contracts, it is one-sided and very much in favor of the lender.
As REALTORS(R), we need to be cognizant of the message sent, when we place a ‘Foreclosure’ sign on a vacant property – this is an open invitation to vagrants and squatters to occupy the property and to use and abuse it! Every vacant property should have utilities turned on and be visited AT LEAST every other day by the agent/lender and the Police should be notified that the property is vacant. Apparently, neither REDC not the lender did this in our case and as a consequence we are contesting the purchase – if necessary, we will walk away from our $5,000 deposit, if the lender does not restore the property to the condition that it was on preview day! Clearly, Tiempo Escrow (the Escrow company for this transaction) is also content to accept closing fees for this transfer, pretending that none of this ever happened!
Where are the good old days, where service and reputation counted?
So there you have it! The tips and traps of buying on a property auction. Let’s face it: neither REDC nor the lenders really care about the property – they just want it off their books! They could care less if the property has been trashed by squatters or that it has devalued in the time it takes to close Escrow! From the time of signing the documents, they wash their hands of the property and the consequences of their lack of responsibility becomes YOUR expense!
So, do you STILL want to buy property on the auction?
–
Althea Garner
REALTOR (R) MBA, MCI, e-Pro
Executive Real Estate
House Of Homes Online
(714) 264-3458
Search over 50,000 listings at my web site:
http://www.HouseOfHomesOnline.com
Women’s Council of REALTORS(R):
Treasurer – 2008 (Coastal-West)
Webmaster – 2009 (Long Beach)
Editor – 2009 (Long Beach)
Education Committee – 2009 (California State)
Orange County Association of REALTORS(R):
Education Vice Chair – 2009
