Recently we discussed how dominant cash buyers have become in the Phoenix real estate market. It’s truly remarkable that for 72% of January 2011 purchase/sale transactions taking place in Maricopa County are for CASH, whereas the national average was only 32%.
Nowhere is cash more important than on the Courthouse steps at the trustee auction sales that occur every business day. The “ante” is $10,000 just to get in the game. And this game is definitely not for the faint of heart. Neither is it for the inexperienced or uninformed.
Without very good due diligence, you can easily miss the date, time or location of the trustee auction you’re looking for. Opening bid prices aren’t posted until shortly before the scheduled sale, and they may change at the last minute. You may show up for a sale that’s was postponed earlier that day.
The other day one of our professional bidders arrived at an auction for a small apartment complex we wanted to buy. The opening bid was posted the day before in a range we thought was reasonable. But when bidding opened for the property, the beneficiary (bank) raised the opening bid to a much higher price – this is called a “jump bid.” It was more than the property was worth to us. No one bid and the property went back to the bank.
But lately the Courthouse steps have gotten crowded, with everyone from first time observers to overseas investors. There are more Hispanic buyers than in the past. Some realtors are trying to get in the game. Occasionally a disaffected homeowner wants to see who buys the property they’re losing.
Our company has been buying at auction for over 10 years. We have a small army of bidders, drivers and researchers. My bidders say they can always tell when someone’s at the auction for the first time by their “deer in the headlights” look. Nevertheless, more properties are selling at auction now than in the last few years.
Comparing similar 5 week periods, from the last week of February through the first week of April, 2009-2011 here’s how the numbers break down:
2009 2010 2011 Change
Residential Pre-Foreclosures 9,928 8,427 5,676 – 42.8%
Residential Trustee Sales 4,097 4,886 5,635 + 37.5%
Commercial Pre-Foreclosures 354 385 343 – 3.1%
Commercial Trustee Sales 142 179 225 + 58.5%
Source: First American Property Research Dept.
New residential foreclosure filings (“Pre-Foreclosures”) are down 42.8% from 2009 to 2011, while actual trustee sales are up 37.5% for the same period. Commercial, which includes apartments, shows similar patterns, although the numbers are much smaller.
Why? Banks have finally gotten realistic about opening bid prices, sometimes doing what it takes to move properties at auction. It only makes sense since great cost savings are achieved by avoiding their REO process. They still have a long way to go.
Demand has also increased. Investors are largely convinced the market may have found a bottom in many sectors. Even if values fall another 10-15% the pain won’t be as great as in the last few years.
If you decide to try your luck at the trustee sale, you may find the courthouse steps pretty crowded. Consider getting help from the pros.
PTE Real Estate Group is a Phoenix-based real estate holding company that owns Arizona Property Wholesalers, AZAuctionBidder.com, US Investment Realty and other companies. They are the largest buyer and seller of distressed real estate in the Greater Phoenix market.
 According to NAR and National Mortgage News, February 28, 2011.