Bait and Switch Lawsuit file to the big Home Auction Company – REDC
Wow – do you know those bid full page ads you see of this major real estate auction with teasers of seeing $400,000 homes with a ’starting bid’ of only $120,000. That is a juicy deal so yes, crowds come rushing into the ‘event’ of the full day real estate auction being held in your area.
Well, guess one couple didn’t like the end-result of the deal they thought they won at auction…you can read the entire article about the filed lawsuit in the O.C. Register by clicking here. Below is an excerpt:
At an auction in Pomona in March, Juan and Laura Torres made the highest bid €” $146,000 €” for a Corona property, according to the suit. Ms. Torres believed she had opened escrow on the property after signing paperwork at the auction and agreed to pay a 5 percent “buyers premium,” bringing the total price to $153,300. However, 30 days later, she was told that “she would not be able to purchase the property unless she came up with $50,000 more money,” the suit says.
Yes, It is definitely buyer beware. You don’t know what that property is like inside. People who have had their homes foreclosed upon are often very bitter and they may have done some very destructive things to the property. It is very important to be aware and understand what you are getting into. Read everything.
I was just now searching for about this when I discovered your post. I’m just stopping by to say that I very much liked reading this post, it’s really clear and well written. Are you thinking of writing more on this? It appears like there’s more material here for future posts.
AUCTIONS ARE FOR SUCKERS – DON’T ATTEND THEM!
Another\ auction coming to Southern California and the advertisements, (costing tens of thousands of dollars) abound on TV and in the Newspapers. Many of these homes are the loser properties, the ones they could not sell to folks for a multitude of reasons, many of them hidden reasons that you, the Buyer, will not find out about until after you have given the Auction house your nonrefundable earnest money! Many of them are even “Teardowns” (structures so messed up it is cheaper to tear them down than to try to repair all their defects), and many others have been “red-tagged” (illegal to inhabit) by the local Building Departments.
You cannot win, so do not even bother to play. Ignore their hype and read the “Terms and Conditions”.
In the interest of public education here are a few facts:
All Properties have a Reserve Price, meaning the Seller of each Property has established an unpublished, minimum selling price. The starting bid is not the Reserve Price.
My comment: Why attend an auction where you don’t know the minimum price? Reserve auctions are OK, assuming the reserve is disclosed. Absolute (i.e. no reserve) auctions are best. With an unpublished reserve, you are shooting in the dark.
the Auctioneer may open bidding on any Property by placing a bid on behalf of the Seller and may further bid on behalf of the Seller, up to the amount of the Reserve Price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders. Yes, you may think you are bidding against other legitimate buyers when in fact, some, or even all, of the other bidders in the audience are actually SHILLS! Yes! They are employees of the Auction House who are pretending to be Buyers so as generate excitement and to run up the price of the property to regular, and often even above, Market Value.
My comment: The auction house bids against you? So not only are you up against other bidders, but you are bidding against an auction house, up to a price you don’t know.
“Winning Bidder’s purchase is subject to, and contingent upon, the REO management of Seller approving the purchase, which shall be given or denied at their sole and absolute discretion within fifteen (15) business days”
My comment:
So even if you manage to outbid everyone else, and the auction house, the bank has 2 weeks to reject your offer.
At some of these phony auctions you even have to pay the commission, rather than the seller paying it, up to 5%.
Remember: The Auctioneer is not acting as an agent for any Bidder in any capacity, and is acting exclusively as the Seller’s agent.
At US Home Auctions they state that “The total purchase price will include a buyer’s premium equal to five percent (5%) of the winning bid amount”
“The buyer’s premium is the fee the Auctioneer charges the bidders to bring the Property”
My comment:
5% is a steep fee to pay as a buyer. Normally a the seller takes the hit for the 6% agent commission.
Folks, there is no way you’ll get a bargain here. Hold out for absolute auctions. There is a tidal wave of foreclosures about to hit the market, and you’ll get a much better deal.
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In case you still have no common sense and still plan to attend an “Auction” –Ok.. so you found a property you want to bid on, you did your home inspection, well scratch that, you went and take a look at the property, It’s not going to be anything close to a home inspection, none the less you like the property, you did all the pre-auction prep work etc. and came up with a max price and want to take a shot at bidding on it. Now what, well.. make sure your prep work included READING the CONTRACT carefully and understand that it’s 100% ONE SIDED in favor of the seller. In the event you’re the unlucky one to win the bid, yes that’s right, I did say UNLUCKY, because the nightmare may just be starting. ….READ THE CONTRACT..READ THE CONTRACT….and other docs you’ll have to sign..all of the over 100+ pages.
Twitter: mariagudelis
says:
Hey there, thanks for the comment and you are absolutely right – that is why a few days ago I blogged about the ‘tide is turning’ after listening to Bruce Norris and how his team is finally getting good deals at the auctions like REDC. That post is at http://www.maria-gudelis.com/maria-gudelis-real-estate-guide/news-on-california-real-estate-and-real-estate-auctions-113.html
Read the story closely the buyers didn’t even buy from REDC they bought from another auction firm and now are using a broad brush to file this suit. Peaple are getting great deals at these auctions …you can bitch and moan but I’ve seen it !