Oops, Dawg, my bad?

Posted April 28th, 2008 by Joe Kaiser

Don't you find it odd, Rob, that the law abhors forfeiture but the Office of the Washington State Attorney General actually recommends it . . .

Dear Rob,

Having attended the Foreclosure for the Rest of Us seminar last week, I’ve learned our only role as investors in the foreclosure marketplace is to bid on properties at foreclosure sales.

That’s it, and nothing more.

Attorney Melissa Huelsman, in her presentation, stated that owners letting their homes go to the foreclosure auction are pretty much guaranteed to receive most if not all their equity, with the average selling price being “80 to 82 percent” of fair market value.

Well, no.


Huelsman

She talked about a foreclosure rescue case she had where another attorney testified the property would most certainly have been bid up at the sale and her client would have been significantly better off losing it in foreclosure than dealing with the scam artists.

I guess she just doesn’t get it.

Pssst . . . IT’S A CRAP SHOOT.

There’s no way to know what a property in foreclosure will sell for at the sale. All kinds of things can and do happen, and suggesting someone in foreclosure is better off rolling the dice at the sale than dealing with an investor is, frankly, absurd.

Believe me, only an attorney who’s never lost his or her home in foreclosure would suggest something so completely ridiculous. Well, maybe a certain legislator or two might as well.


$1.2 Million

Earlier this year the Tapps Island waterfront home pictured above sold on the courthouse steps at a trustees sale. And, although it’s assessed at $870k, it last sold on the open market for just shy of a million dollars.

I don’t know why the owners couldn’t pay their mortgage or didn’t respond to investors offering to buy it before the sale (or perhaps even do a sale-leaseback deal), but I do know what happened at the foreclosure auction . . .

It sold for just over $390k, a dollar more than the lender’s opening bid.

A DOLLAR.

The investors I talked to agreed it was worth about 1.2 million, but for whatever reason, when it came time to bid, only one fellow did and that equity went “poof.”


You just never know

What would it have sold for?

Well, we don’t have to wonder, do we? We know exactly what it sold for . . . one dollar over the opening bid.

Except that, had an investor done a foreclosure rescue deal and had Melissa Huelsman subsequently represented the seller, she’d likely have an attorney on the witness stand saying the property would have sold for something closer to $800k or even $900k.

Ugh, no.

It sold for a dollar more, period, which is the nature of the foreclosure auction . . . you just never know.

And that’s why, Rob, you don’t suggest to people they gamble their home at a trustees sale as if it were a $2 lotto ticket.


My bad?

So what do you say to that owner now?

What do you tell him when he says, “Hey! I thought you said I’d be better off letting it go to sale,” or “I thought the legislature knew what it was doing when it effectively banned sale-leaseback transactions,” or “What happened to my 82%?”

Oops?

My bad?

Seemed like a good idea at the time?


Welcome to WA

Don’t you find it odd that the law abhors forfeitures but the Office of the Washington State Attorney General actually recommends it and created laws to make sure owners choose that route rather than risk dealing with an investor?

I know I, and virtually every other thinking person with any real estate experience, does.

abhorrent
detestable, hateful, loathsome, despicable, abominable, execrable, repellent, repugnant, repulsive, revolting, disgusting, distasteful, horrible, horrid, horrifying, awful, heinous, reprehensible, obnoxious, odious, nauseating, offensive, contemptible. — Apple Thesaurus

Please stop misinforming people in foreclosure by suggesting letting their homes go to sale is something to be considered. It’s not. It should be avoided no matter what.

NO MATTER WHAT.

Foreclosure, Rob, and the suggestion it is a solution in and of itself, is abhorrent.

In the arena,

Joe Kaiser


3 Responses to: “Oops, Dawg, my bad?”

  1. Drew Hitt responds:
    Posted: April 28th, 2008 at 5:46 am

    Joe,

    I’m sure you can speak from experience on this too…

    The deficency judgements created BECAUSE of the foreclosure auction. Banks are not in the business of holding real estate, so sometimes they themselves don’t bid at the auction. So what happens? An investor bids LESS than what is owed, effectively buying the house and CREATING a deficency judgement against the homeowner.

    Could the AG actually be wanting this to happen? This is way worse than a sale-leaseback. Just like in Michigan and other states, I can see banks now not bidding on properties in Washington that go to auction because of the enormous increase in properties going back to the bank.

    Then what’s going to happen? Tons of vacant homes, abandoned properties, and deficency judgements on half of those people whose homes went to foreclosure. Therefore creating a crisis where one didn’t exist… Nice job.

  2. Joe Kaiser responds:
    Posted: April 28th, 2008 at 5:55 am

    We’re actually on the safer side on this one since almost all sales in Washington (but not all) are trustees sales where no deficiency judgment is permitted.

    However, if you’ve got a junior loan and the first forecloses, that junior lender can certainly sue and get a judgment against you on it. He doesn’t get wiped out, just wiped off, to quote a buddy of mine.

  3. Loya responds:
    Posted: May 4th, 2008 at 8:09 pm

    Hmmmmmmm………….AG says it is better to let the house go to foreclosure than to do a deal with an investor……….Rob, you just cost this property owner thousands of dollars…..good job!


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