About Property Auctions in Los Angeles

This is borrowed from Brock Harris, esteemed Silverlake broker.

Big-time Los Angeles real estate auction coming up this Saturday. I’m registered and ready to bid on 5 properties after looking at about 200 hundred.

Spending all this week researching, figuring resale value then taking 65% of that – that’s the highest bid price I’m willing to pay. Lots of paperwork. Bo-ring. I’m ready for the bidding. They say prices are now at 2004 levels. Good. I didn’t buy enough back then. Time to stock up.

First, the nittygritty:
-All sales are final.
-You need $5000 cashier’s check, and you have to write a personal check for the remainder of the 3% deposit. If you can’t close the house, you don’t get it back.
-the auctioneer tacks on 5% of the price for their commission. You pay it.
-You have 30 days to close after winning the property and can get normal loans (mostly – skip the “all cash” deals, they are effed).
-Most sales still have to go through “lender approval.” So when you win the auction, you still don’t know if you got it for two weeks. I know, stupid, right?

And here are some other things I’ve learned about auctions:
-a bunch of dudes in tuxes, hopped up on Red Bull, try to pump up the bidding. Ignore them.
-nice houses get bid up to full retail. Only takes 2-3 couples and the price shoots up.
-most properties at auction have been on the MLS and didn’t sell. There is no point going to auctions but not shopping the MLS. I’ve said it once, I will say it again – every successful real estate investor I know buys 95% of their houses off the MLS. Most buyers are better off bargain-hunting the MLS than attending auctions.
-they are still largely underattended. I attribute this to the hassle and expense of going to an auction, when there are thousands of bank-owned properties already for sale on the MLS.

When’s the bottom everyone keeps asking me. Answer: the “bottom” is not a day, or week. No one rings a bell. Bottoms last about 18 months…and I believe we just got started. In Silver Lake alone, 118 properties have sold in the last 90 days. Buying windows are historically very short, so don’t let it pass you by.

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