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The Journey Begins: Research

10th January 2007

Dave

For years I have thought about investing in residential properties. I’ve had some experience in just about all phases of home building, not mention having seen every episode of “This Old House”, so I like to think I’ve earned a “BS” degree in everything housing. You probably notice a lot of that “BS” as I recount my adventures in buying foreclosed properties. My initial research began online looking for general information on foreclosures. From there I concentrated on Oklahoma law and then the individual County procedures. The difference between what you think you understand from research and the way things really are can be quite comical.

In Oklahoma, once a loan is in default, foreclosure papers are filed in the county the property is in. All parties are notified, a judgment, setting the amount of the default, is handed down by the court, an independent appraisal is ordered, fees are assessed, and an Sheriffs auction date is set. The default can be cured anytime up until the confirmation hearing. Each county has their own procedures for listing the properties, but you can get a list from the county Sheriff’s office. Their list usually includes the property address, name of debtor, lien holder and representing attorney, auction date, case number, and appraised value. With that little bit of data, a wealth of information can be researched. With the case number, the public can view the paper filed with the courts and even do a preliminary title search to determine other liens such as tax liens. I’ll go into this in more detail when I go over my first auction win.

Even though the appraisal typically sets the minimum opening bid (2/3 appraised value) I consider it meaningless. As I understand it the appraiser simply drive by the property to make sure it exists and then they do an analysis of recent comparable sales. There is very little physical inspection and an interior inspection is almost never done. The caveat “Buyer Beware” is in full effect here. In some rare cases a property can be sold “without appraisal.” I’ll give a hint an say this was the case in the property I ended up with, but the caveat should be posted in large flashing neon letters with alarms sounding when you see this case come up.

I started going to the Tulsa and Wagner County auctions several months before I was ready to start bidding. The Tulsa auction is quite a bit larger than in Wagner and operates in a slightly more formal manner due to the size, but for the most part they are the same. The lien holder starts the bidding at whatever dollar amount that they decide. Anyone else can make subsequent bids in minimum increments of $100.00 but less than $5,000. The lien holder is not limited to this rule, they can bid in any amount they choose. The lien holder (or their attorney acting in their behalf) will continue to bid until there are no more counter bids or until the bidding exceeds their loss. I was never able to figure out how to predict how the lien holder will bid. They often bid well in excess of the appraised value, and sometimes even open the bidding way over the appraised value. They almost always exceed the judgment and associated cost listed in the court papers also. If anyone has an inside view of how they operate I would love to find out more. I have a good idea they only bid up to their losses but I haven’t been able to determine if the general public can get this information beforehand

If someone from the general public is the high bidder they have 24 hours to put down a 10% deposit in a cashier check made out to the County Court Clerk. If the high bidder fails to put down the 10% the next highest bidder has the opportunity to by at their highest bid. That is if they can be contacted. If neither bidder places the 10% then the property is rescheduled for another auction. Once the deposit is received, a confirmation is set 4 weeks from the auction. In this time the default may still be cured but I understand this almost never happens. There are still a lot of things that can go wrong in the 4 weeks leading up to the confirmation hearing as you will soon see.

Well, that pretty much sums up my research or at least glosses over the high points. Next I’ll recount my adventures in buying properties at auction

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