Most of the auctions we conduct are absolute auctions. Properties sell to the highest bidder regardless of price. Occasionally, we do include properties that are not absolute. This is the story of one of these properties.
Recently, a seller approached us to sell a property that was vacant. It was encumbered by a mortgage. The owner had not made a payment during the last year and was facing foreclosure. Our evaluation determined the property was worth less than the mortgage balance.
The property was a solid, brick ranch-style, single-family home in a desired neighborhood. In its day, it would have been a show place. But, it was extremely dated, needed some maintenance, and lacked curb appeal. Our seller was not in a financial position to update the property.
Our plan included a call to the bank to negotiate a short sale in advance of the auction. Short sales are notoriously difficult and seldom successful. When using an auction to sell the property, there would not be time for extended negotiations after the bidding ended. We were not willing to conduct the auction, unless there was a strong likelihood the property would sell.
During our conversation with the lender, we explained all the details of how the auction would be conducted and the costs. He understood we were taking all the risks, as he could foreclose later. Without a sale, we would lose our time and the costs of promoting the auction. With a sale, he would save the costs of foreclosure and carrying the property until it sold.
We considered the number the lender quoted reasonable and achievable. We promoted the auction as agreed, and the auction was a success. The lender received 15% more than the short sale price, even after the expenses and our commission was paid.
The borrower is no longer involved with the property. The lender saved thousands by selling before foreclosure.
If you or someone you know is in this situation, call us to help. Every property and situation is different, and we offer many different solutions.