Being in the foreclosure business, I found myself at the New York Hyatt on Sunday, at the REDC auction, with two separate clients. They had advertised 294 properties including 11 from Staten Island. On the day of the auction 108 properties were offered, including 6 properties on Staten Island. All of the Staten Island properties were currently listed as active in the Staten Island Multiple Listing Service (MLS).
The atmosphere was one of a circus, with 3 huge screens in front; but instead of clowns, they had men in tuxedos for entertainment. These were the “bid assisters”. Their stated purpose was to help the bidders understand what they were bidding, but the subliminal purpose was to get the bidders into the excitement of the auction so that they would bid over their heads and get caught up in the action.
They did this with sounds, and gyrations. When you bid, they would run and jump in front of you and try to pump you up by rounding their arms in large circles, with eye contact, with clapping and whooping, etc..
The auction started when a person claiming to be the president of the company stood in front of the rows of anxious bidders and talked about how auctions were the easiest way to buy real estate. If you were the successful bidder,and if the property were financeable, you would go to the back of the stage where one of the several banks in attendance would qualify you and get you a mortgage. Even if it were all cash, you would go to the side and sign a contract and give them the deposit ($2500 bank check) plus the difference in a personal check).
And then it begins.
There were three screens. On the left, a screen that had boxes of each of the item numbers in the auction (The Staten Island #’s were 311, 316d, 317, 319, 320, & 321). Once a property was sold and the buyer had signed the paperwork, submitted the check, and their credit checked out, the number changed to a green “CONTRACT”.
On the screen in the center was a photo of the property; and on the right hand side of it was the starting bid (which in many cases was $1,000), and what the property had been valued at once before. Can you imagine? These homes were in this auction because they either had phony appraisals to justify ridiculously high prices in the first place, but most certainly because they weren’t worth what was owed on them, and they were currently pushing the highest value they had ever had.
The final screen on the right showed the number of the item being auctioned at the time. This screen also contained a legend of either CASH or financeable.
And so it went. First a few properties from Newark, NJ; then East Orange, NJ; and then it jumped upstate to Newburgh, New York for a few; then back to New Jersey, and then to Connecticut.
Surprisingly there was bidding on every single property! All the while the auctioneer was doing what auctioneers do: speaking very fast, repeating the price he had, the price he was looking for, etc. (The auctioneer was so loud that I took off my hearing aid and was able to hear a lot of what he said). The auctioneer would also tell the audience how great a deal
they were getting because of the previoiusly appraised value.
Every once in a while a property that had already been bid on was returned to the auction and was re-auctioned; or, as it was put: “we were given a 2nd chance.” This was because either the original buyer didn’t realize what he had done, or he wasn’t credit worthy, or some other reason why the successful bidder did not sign a contract.
Finally, they got to the Staten Island properties. The first one on the agenda was a property at 45 Anjali Loop: a two-family semi in New Springville. The property had originally been listed for $399,000 on March 30, 2009, and reduced to $394,000 shortly thereafter. At the auction it was a hot item. It got high into the $300,000’s before the bidding ended. You could see that there were several people who came to the auction just for this one property, because a lot of people left when it was finished. They probably could have purchased it through the MLS for less.
Next up was a house that had been in the previous REDC auction held a couple of months ago: a two-family in a not-so-good part of Stapleton. 97 Osgood Avenue had been listed in the MLS originally in October of 2008 for $299,000; but over the months the asking price has been reduced to $168,000. The Staten Island Advance had reported that this property had been sold at the prior auction, but apparently that deal died. This property also was hotly contested and sold above the MLS asking price.
Another property that had a lot of action was a townhouse called Mariners Lane. I checked REDC; and in spite of its activity at the auction, they are listing it as "still active", ready for the next auction; so I guess that deal died too.
Meanwhile, the two properties that one of my customers was there to bid on sold for much higher than he was prepared to pay, and higher than the offers he had made through the MLS prior to the auction on both.
The final Staten Island Property, and one which I was very familiar with and with a customer to buy, was vacant land on Scribner Avenue. It was originally listed for $97,500, later reduced to $49,000. I had a customer whose offer had been accepted for $60,000; but during his "due diligence", he discovered that there was a commercial overlay on the property so that you might not be able to build a house; so my customer had walked away. My customer at the auction had asked the bank for a contingency of 45 days to determine by filing if he could build a house, but the bank said no. He went to the auction to try to buy the property for $20,000 or less. The property had formerly been a 4-family prior to the city’s demolition of it as an unsafe building, which had occurred within the past 2 years and which put the zoning issue into a gray area.
The opening bid was $1,000.
The screen stated that the property had previously been valued at $540,000. And the crowd went wild.
My guys went to $32,500. A couple of other people in the crowd kept bidding at the urging of the “bid assisters” who were egging them on, yelling, screaming, cheering, while the auctioneer was saying that the property is such a fantastic deal because it had been previously valued at $540,000 (he didn’t say, mind you, that it had been valued that highly with a 4-family on it).
The bidding ended at $65,000. I went up to the successful bidder and asked him whether he knew that there was a commercial overlay on the property. He had no idea what I was talking about. He asked me if I knew what the size of the property was and what could be built on it.
I recommended that he contact an architect before he did anything else.
Shortly thereafter I saw him again, after he had signed the contract, and given them his $2500 bank check and the rest of the 10% down payment by personal check. Again he asked me what he could build, and again I told him that he might be able to build a store with an apartment, but he should go to his architect.
Speed forward to Tuesday when I received a call from the successful bidder telling me that he lives in Queens and realizes he has no use for the vacant land on Staten Island. I suggested that he contact an attorney immediately (within 72 hours of the auction).
So what is the point of my story you may be asking yourself? The point is that buying at auction is probably not generally the smartest move. While it may be easy, as the president of the company says, but it might not be wise. I am not talking about the foreclosure auction at the County Clerk's office. I am talking about a situation like this, with professional hawkers.
What I have learned from this auction is that there were no real great bargains; no deals were made that you couldn’t have gotten from the MLS. Want to buy a foreclosure? Call me, its safer, and smarter.
………………………to be continued