The McKenna Overage Enigma

Posted July 15th, 2007 by Joe Kaiser

Are you seriously advising someone in foreclosure to let her property go to auction and hope there's money left on the table once the dust settles?

Dear Rob,

Rachael owned a house in Kittitas County and last winter the two of us decided to partner up.

My role in the partnership?

Stopping her foreclosure.

House on Pierce Road

And so, with just days remaining, I paid the taxes and brought that foreclosure to a grinding halt.

How do you suppose that made her feel?

I’m guessing pretty damn good.


What should she have done?

As an investor, I’m stunned by what I read on your web page, Be Cautious of Mortgage Foreclosure “Rescues.”

I’ve quoted you here . . .

Know that even if you lose your home, you may receive money. . . . You need to obtain independent advice on the value of your home and likelihood of receiving money from a foreclosure sale before signing any documents that might affect your rights to collect this equity.— April 10, 2006 “Ask the AG” column

Are you seriously advising someone in foreclosure to let her property go to auction and hope there’s money left on the table once the dust settles?

Say it ain’t so, Rob.

Suggesting a homeowner in foreclosure might be better off by letting her property go through the auction process is something only someone with no real world understanding of that process would suggest.

And clearly, that includes your staff.


don’t try this at home

It’s okay for investors to let properties go to sale and hope bidding activity creates overage profits.

That’s the sort of “roll of the dice” game play we can handle. We can, because when approached soundly, we have little money invested, making it a tolerable gamble.

Equally important, we likely have more than one property in the sale. In fact, if you look across the board, we may have 10 such properties in various county tax sales at any given time.

We know that in 30 or 40 percent of these sales, we’ll lose whatever we have invested because they’ll either get sold at auction for the opening bid amount or, more likely, get claimed by the county because there were no bids.

With 10 properties, the risk is manageable. Even if half result in losses, the upside is great enough for us to be confident we’ll do okay once the overall results are in.

But if you’re a homeowner thinking about letting your house go to sale and walking away with a big overage check?

You’d be nuts to consider it.


off the charts risk

A homeowner has ONE property. Letting it go to sale and hoping overage saves the day is nothing short of foolishness.

To suggest it as a viable option in addressing a foreclosure situation is more foolish, yet.

Even if the chance you’ll receive nothing happens only 30% of the time, when you have one property and no one bids at the sale, you just experienced receiving nothing 100% of the time.

Ouch.


should have let it go to sale?

Your office seems to be suggesting Rachael would have been better off crossing her fingers and letting her house go to sale.

That’s absurd.

This is the real world, where real dollars and real lives are at risk. In the real world, letting properties go to sale is the last thing a homeowner should consider.


case closed

Rachael called a couple weeks ago to thank us, having just cashed our check for $30,000.00. That was her share of the profits and the better alternative to risking it all at the Kittitas County tax foreclosure auction.

We paid the taxes last winter, and when the snow finally melted, we got the house fixed up and on the market.

That fix-up work included repairing the septic system, re-siding the rear of the house, installing a new bathroom floor, and a bunch of other things Rachael had no money to take care of herself.

Soon thereafter, a buyer made an offer, agreeing to pay almost exactly what we thought it would sell for, and last month that sale closed.


how we roll

There’s a typical foreclosure rescue for you, Rob.

That’s how we roll.

We take foreclosure off the table, take control of the situation, and then just flat out get things done.

Rachael called to say how happy she was with the way it all turned out. Your office, I imagine, will now call to let her know she’s been a victim of a foreclosure rescue scam.

Good luck with that.

To be continued . . .

Respectfully,

Joe Kaiser


4 Responses to: “The McKenna Overage Enigma”

  1. spyboy responds:
    Posted: July 18th, 2007 at 11:59 am

    Greetings,

    Just to be clear, i do not read the Atty. Gen. post ( “Ask The AG”, 4/10/06 ) as the AG of “advising” anyone to anything other than to “obtain independant advice on the value of your home and likelihood of receiving money from a foreclosure sale before signing any documents that might affect your rights to collect this money.”

    In other words Joe, I dont see that the AG is actually doing what you suggest that he is doing, ie; “advising someone to roll the dice, let her property go to auction, and hope there’s money left on the table once the dust settles.”

    I do think that the advice the AG is actually giving, regarding the homeowner making some effort to determine the likelihood of their being “surpluss proceeds” after the sale, and using that information in determining the best course of action, is reasonable.

    Of course, there may be significant practical difficulties in a homeowner implementing that advice, depending on the circumstances, and in some instances it may not be do-able.

    Thank You.
    SpyBoy

  2. Joe Kaiser responds:
    Posted: July 18th, 2007 at 12:59 pm

    Spyboy,

    If you read the press release from March 14, 2007, the AG says sellers would be better off had they never agreed to do business with us (of course, they never seem to want to talk about all the properties where nothing was bid and those sellers came out on top).

    That’s code for letting it go to sale, and doing so isn’t such a hot idea for a homeowner to be considering.

    I understand from where you’re sitting it’s a reach, but from seeing claims made from within this investigation and hearing the McKenna Overage Enigma (MOE) bandied about, I can assure you they really do think it a viable solution to foreclosure.

    And that’s a bad concept to plant in someone’s head who isn’t prepared to roll the dice and risk it all.

    For an investor with a junk lot, it’s perfect.

    For a Bill and Sally with a home, not so hot.

    Joe

  3. spyboy responds:
    Posted: July 18th, 2007 at 5:08 pm

    Greetings,

    Joe, my comment was limited to the 04/16/06 Ask The AG column that you referred to in the posting. That is all I was responding to, as that is what it appeared that you were commenting on in the post.

    I’m curious, so I’ll ask you this question:
    Do you think it is good advice that a homeowner facing foreclosure obtain advice as to the current market value of their home, and the possibility of their being surplus proceeds at the auction/sale ?

    Unfortunately, I am finding it challanging to get appraisers to provide “liquidated value” type appraisals in my area. Mainly because some dont even know the particulars of such appraisals.

    Thank You.
    SpyBoy

  4. Joe Kaiser responds:
    Posted: July 18th, 2007 at 5:16 pm

    SpyBoy,

    Perhaps I wasn’t clear.

    Getting an opinion about what the property is worth, of course, is a good thing.

    But to suggest you get someone’s opinion about what it would go for at a foreclosure auction and consider letting it go through that process?

    That’s something different and not advisable.

    I know as much as anyone about what things will sell for at a foreclosure auction, and I couldn’t begin to guess what someone’s property will go for.

    To suggest someone could only demonstrates a complete lack of understanding of the dynamics of a foreclosure auction sale.

    If it’s got equity before the sale, you get it any way you can. What you don’t do is let it go to sale and hope.

    We attempt to list everything and try to get things sold prior to any foreclosure sale to remove the uncertainty from the situation. And if that proves fruitless, we understand there’s little or no equity and letting it go to sale merely becomes a second bite at the apple.

    Joe


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