What Really Happens at the Maricopa County Public Auction?

August 10, 2011 at 7:05 pm 15 comments

by: Maria Hass
It’s just another day at the steps of the Maricopa County Courthouse located at 201 W. Jefferson St. in Phoenix, AZ. The third session of the trustee sale also known as the public auction starts at 2 p.m. A crowd of eager investors wearing shorts, t-shirts, tennis shoes, flip flops and baseball caps gather around the youthful-looking auctioneer seated at the corner of the outdoor courtyard of the Maricopa County Courthouse building. For the first 20 minutes, the auctioneer announces any postponement or cancellations on 128 homes listed for auction at the 2 p.m. session. Two earlier sessions were conducted at 10 a.m. and 12 noon.

Once this is cleared, he opens the bid for each house on the list. A majority of the bidders are wholesale investors bidding for their company or bidding for a client. In May of 2008, out of 200 homes auctioned at the 10 a.m. and 12 noon sessions, eight of them actually sold. That would mean that 96% of the homes went back to the bank. The reason for the few sales is the high starting bids. There is an average of 400 homes listed for auction everyday and about 96% of them end up as REOs/bank-owned. However, the auction has become more competitive lately with more investors taking advantage of distressed homes and the percent of homes going back to the bank has been significantly reduced to about 50 percent.

Below are FAQ about the Trustee Sale or Public Auction:

1. Where and when does the public auction take place?
Every weekday at the steps of the Maricopa County Courthouse, located at 201 W. Jefferson St. in Phoenix. There are three sessions held at 10 a.m., 12 noon and 2 p.m. Sometimes, trustee sale auctions are held at the trustee office or lawyer’s office. A Realtor will be able to find out information on the trustee or you might be able to get this information at the county assessors website.

2. Who can bid at the public auction?
Anyone who has a $10,000 cashiers check is qualified to bid.

3. What if I win the bid?
Your $10,000 cashiers check will be withheld. The remaining balance is due no later than 5 p.m. the next business day. If you are not able to pay in full within the timeframe given, you will lose your $10,000 cashiers check and may be barred from future participation in the public auction.

4. What is the starting bid?
The bank decides what the starting bid is at a price they think is fair. Typically, half of the bids begin at a “full debt credit bid”. This bid is based on what is owed on the property, plus legal fees and other fees associated with the trustee sale process. In many cases, the starting bid is higher than the current value of the home. These homes usually go back to the lender. There is also the “Specified or Drop Bid”. This type of bid is specified by the bank and are drastically reduced overnight and could get snatched up pretty quickly by investors.

5. What should I do if I’m interested to bid in a public auction?– Conduct a due diligence review on the property you would like to bid on. Do a drive-by of the property, conduct a CMA. Know as much as you can about the property you’re interested in. Postponement and cancellations are announced minutes prior to the auction. Check frequently on the most current status of the property of interest to you.
– Structure your financing through a hard money lender before hand (regular banks don’t loan for properties bought in a trustee sale).
– Plan your investment strategy before securing a loan. E.g., how much money do you have for repairs, what is your holding cost, maintenance cost, tax liabilities, etc.
– What is your exit strategy if things don’t go as planned?

6. What type of deed do I receive at a trustee sale?
Trustee deed. This deed clears you from paying Junior encumbrances such as 2nd Mortgages, mechanics lien, contractors lien or any unpaid debt. This deed is subject to Senior encumbrances meaning, the buyer has to pay all senior liens such as taxes, IRS liens or any federal liens if any, to own the property free and clear. The Trustee deed is received a few weeks after full payment. Once the deed is received, it is the responsibility of the purchaser to record the sale and pay up all existing Senior liens.

7. What if the previous owner failed to pay taxes to the IRS and a lien is placed against the property?
The IRS is a senior lien and is allowed to redeem the property within 120 days after the sale. The IRS will return all purchase money to the buyer and add 6% interest of the purchase price per day to reclaim the property. You may get in touch with the IRS to see if they would release the lien for a negotiated price. Sometimes, the IRS may decide to go after the previous owner and release the lien at no cost or the purchaser may have to weigh out the 120 days redemption period.

8. Is this the best way to snatch up great deals?
In my opinion, buying an Bank-owned property is a better way to go. It is less complicated, easier and can offer you bigger savings. Once a home is bank-owned, banks are more desperate to get rid of the home because they have held the property for so long (at least nine months without seeing a penny). Also, according to mortgage financier Freddie Mac, the typical foreclosure cost is nearly $60,000. The banks lose around 20% to 25% of the loan’s value on a foreclosure. On top of this, REO (real estate owned) or bank-owned homes are available for showings unlike those homes in the public auction. As a buyer, you are able to see the condition of the home and also inspect the home prior to closing a deal. In a public auction, you buy the property site unseen without inspection in most cases. There is a bigger risk involved in purchasing homes at the trustee sale that may cost you sleepless nights.

9. Are All Trustee Sales Final or Absolute?
In some rare instances, the homeowner may have filed a bankruptcy just a few minutes before the sale. If this happens, the sale is reversed. All monies owed is returned to the buyer and the sale does not consumate.

10. Can the lender profit from a trustee sale?
No, if there are any surplus in the amount, this amount is alloted towards lawyer fees and processing cost.

11. What if the property I purchased in the trustee sale is occupied by the previous owners?
The right of the previous owners to live in the house terminates the moment the house is sold in the auction. The new owner has the right to evict the previous owners as soon as possible.

12. What if the property I purchased in the trustee sale is occupied by a tenant?
Under the Tenant protection Act good through 2012, the investor buyer has to honor the lease of the tenant. If the purchaser intends to occupy the property, the tenant has 90 days to vacate the property from the time of sale.

13. If it’s too risky to purchase a home at a Trustee sale, why do investors do it?A buyer can purchase a home quickly (within 48 hours) at a trustee sale. Whereas, it takes an average of 30 days for an REO or traditional real estate sale to close. If you do your research and due dilligence well, you’ll find some great deals at the public auction.

14. Who do I contact regarding hard money financing if I don’t have cash to pay for the property? Contact me at (480) 650-0075 for more information.
15. How do I learn more about the public auction process?
You may contact me at (480) 650-0075 to begin the process or to answer any questions that you may have.

To view a brief YouTube video of a Maricopa County real estate auction, click here.

Maricopa County Trustee Sale in Phoenix, AZ

Maricopa County Trustee Sale in Phoenix, AZ

Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate, Real Estate Deals. Tags: , , , , , , , , , , , , , , , , , , , , , , , , , .

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15 Comments Add your own

  • 1. Eric Hundin  |  October 22, 2008 at 3:00 pm

    I found your blog on MSN Search. Nice writing. I will check back to read more.

    Eric Hundin

    Reply
  • 2. arizonabargainhomes  |  October 30, 2008 at 8:59 pm

    Thanks for your comment. I appreciate you visiting my blog and hope you’ll visit regularly for more valuable information and Arizona real estate news.

    Reply
  • 3. Judi Miller  |  November 24, 2008 at 1:14 pm

    how do I get a list of propertys to review prior to going to the courthouse steps? Thank you for the infomation on the auction.

    Reply
    • 4. arizonabargainhomes  |  December 12, 2008 at 4:28 pm

      Thank you for reading my blog. You may visit azforeclosurelist.com or email azforeclosurelist@gmail.com or http://www.bizazforeclosures.com to find out about the list. These companies focus on Maricopa county trustee sale. I think, you will have to register to get a list. You may also email johnraypc@cox.net to get more details. They can do the research and bidding for you. If you would also like to look at bargains with bank-owned properties, short-sale or regular resale homes, I would be happy to assist you with that. Thanks again and keep visiting my blog.

      Reply
  • 5. jason schram  |  February 16, 2009 at 9:40 am

    What do you do if you are a tenant in one of the homes for sale?

    Reply
    • 6. arizonabargainhomes  |  February 16, 2009 at 10:33 am

      Jason,

      The foreclosure proceedings supersedes the landlord-tenant agreement. Pack-up your stuff and find a new place. For your next rental, be certain that the home owner is current on payment. Ask for a copy of the most recent mortgage payment and have a Realtor check in their system if the home is about to be foreclosed on. Although, as a renter, you run the risk of having a property owner being behind on their mortgage AFTER a lease agreement is signed.

      Thank you for your question.

      Reply
  • 7. C e c i l ~ S p a r k s  |  May 28, 2009 at 7:40 am

    your link above didnt work for me …

    but this did ( copy / paste mine )

    http://www.bidazforeclosures.com/

    Reply
  • 8. Oliver  |  August 11, 2009 at 12:48 pm

    Penny auctions have gained popularity over the last few months and now have hundreds of thousands of users.
    Just launched new Penny Auction Site, and there’s a really good chance of winning at the moment, as there aren’t many players to compete with as of yet.

    Reply
  • 9. Kenneth Walker  |  April 12, 2011 at 1:27 pm

    I had two propertiies that were foreclosed on in 2010, where can I go to see if there was a surplus between the sold price versus the value price and if there was a surplus and if it is ,and does it belong to me.

    Reply
    • 10. arizonabargainhomes  |  April 13, 2011 at 9:12 am

      Hello Kenneth,
      I do not quite understand what you mean by the sold price and the value price. Did you mean loan amount? Usually homes that are foreclosed on are worth less than what the homeowners owe. Therefore there is no “equity or surplus” to claim.

      Reply
  • 11. tony  |  June 18, 2012 at 9:26 pm

    Who pays the tax lien on an
    auctioned home
    ??

    Reply
    • 12. arizonabargainhomes  |  June 19, 2012 at 8:01 am

      The buyer does plus any other liens attached to the property.

      Reply
  • 13. Buy Direct  |  July 16, 2012 at 9:44 pm

    I just like the helpful information you supply on your articles. I will bookmark your weblog and test once more right here regularly. I am somewhat sure I will be informed plenty of new stuff proper here! Good luck for the next!

    Reply
  • 15. digital Weather Station  |  July 3, 2013 at 11:23 am

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    Reply

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