The McKenna Overage Enigma, Part 2

Posted July 16th, 2007 by Joe Kaiser

It's unpredictable, the fix is often in, and you'd better believe . . . they'll get eaten alive.

Dear Rob,

We talked yesterday about this idea of yours, intentionally letting one’s home go through the foreclosure process.

It’s described on your “Ask the AG” web page, Be Cautious of Mortgage Foreclosure “Rescues,” from April of last year.

Apparently, you’re recommending homeowners consider letting their homes go through foreclosure and get paid that way.

Again, it’s a terrible idea. Way too risky.

Maybe an investor with a lot of experience could do okay with that strategy, but a Tom and Suzie homeowner?

Crazy to even consider it.


welcome to the real world

It’s an idea that works great on paper. In the real world, it’s a whole different story.

I had a 2nd mortgage on a property a long time ago that went through foreclosure (the 1st was foreclosing) and was confident my loan would get paid in full at the sale.

There was a ton of equity and being a nice looking property, I knew there’d be lots of bidding.

But there was none.

I was out of town and shocked to learn the property sold for $1 over the opening bid. Impossible! So, once back, I asked a buddy I knew attended the sale what went on.

“Another investor paid us all not to bid,” he said.

“How much?” I said.

“Eight hundred apiece,” he said.

“How many?” I said.

“There were seven or eight of us, but don’t tell any of the guys I told you,” he said.

And that’s how my interest was wiped out without me seeing a nickel of my investment.


welcome to the real world, again

A couple years ago we were in the process of buying a house in the Hilltop area of Tacoma. That’s an area where prices were soaring.

It was a tricky deal because title was spread among heirs and siblings and we’d spent a couple months tracking down fractional owners and getting them to agree to sell.

And, we’d been successful, securing a 100% interest in the property.

It was in foreclosure and with a couple weeks to go, we contacted the trustee to let him know we wanted to reinstate the loan, as was our right.

The trustee’s office said they’d calculate the amount needed to bring the loan current and let us know as quickly as possible.

We reconfirmed a day or two later the pending foreclosure would not take place in the meantime, and they assured us it would not.

It did.


foreclosure happens

We’d already accepted an offer to sell the property to a local investor for $69,500, and we’d later find out, he had an investor ready to buy it from him for $85,000.

But all of that came to a crashing end when the trustee advised us we were out of luck and the property had been sold at auction, right on schedule.

Huh?

And, no apologies or nothin’.

Care to guess what it went for, Rob?

A dollar more than what was owed.

What was owed?

Less than $12,000.

I don’t know what happened and why there wasn’t bidding activity. I do know there were some 30 people in the room to bid (or so I’m told), but that no one else was interested in our property.

Or, more likely . . . the fix was in.


too much risk

Imagine you’re the homeowner is this situation.

And you’ve decided to let your property go to sale in hopes of collecting the overage (something you read about on the AG’s website), and you get skunked.

You’d be devastated (especially if you’ve turned down another offer prior to letting it go to sale).

Rob, speaking as an investor who knows, it would be a very good idea to remove your Ask the AG suggestion that owners in foreclosure consider rolling the dice at a foreclosure auction.

This McKenna Overage Enigma is a really bad concept.

The foreclosure auction is no place to be sending homeowners to roll the dice with their equity. It’s unpredictable, the fix is often in, and you’d better believe . . . they’ll get eaten alive.

Respectfully,

Joe Kaiser


5 Responses to: “The McKenna Overage Enigma, Part 2”

  1. Matt Swarner responds:
    Posted: July 16th, 2007 at 8:56 am

    Pretty scary stuff for a homeowner with lots of equity. As Clint would say, “Are you feelin’ lucky punk? Well, are ya?”

  2. AKM responds:
    Posted: July 16th, 2007 at 6:29 pm

    Man, there really are some sleazebags out there Joe. Too bad the AG is wasting their money on you, when perhaps they should be posing as a buyer at one of these trustee auctions and bust the REAL bad guys.

    If I was in the position that these folks were, and listened to McKenna’s advice, then got screwed over as you describe, I would be complaining to the media and anyone else who would listen!

  3. Joe Kaiser responds:
    Posted: July 17th, 2007 at 1:05 am

    That’s too funny you mention the screwed over part.

    We did a deal last year where after buying a guy’s house, the county contacted him to let him know he’d been scammed and that he’d have better luck just letting it go through the tax sale.

    He yelled and hollered so we agreed to let him out of our deal and have it go to auction.

    It sold for $1.

  4. Drew responds:
    Posted: July 17th, 2007 at 6:23 am

    Now if his house sold for $1, would the AG go after the county for consumer protection violations? After all, after the county approved auction selling to your would be in the consumers best interests. They should have stopped the sale for $1 and said “Sorry we’ll sell this one to Joe, at least he’ll pay more than $1 for a house.” Even if you paid $100 that’s a hundred times better return for the consumer, which is a better offer in the best interests of the consumer which is what the AG wants, isn’t it?…

  5. Leon Blocksom responds:
    Posted: July 21st, 2007 at 5:52 am

    Isn’t it funny how most government/county employees will not and know better than to give legal advice. And here they are advising people to let thier property be foreclosed…yikes!


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