Welcome back to our Foreclosure Surprises series, where certain tidbits of advice can go a long way towards preventing costly decisions and mistakes when investing in foreclosures.

Part 2 in this series is the AS-IS property condition language in the typical foreclosure sale terms and conditions and contract of sale. When a purchaser buys real estate in the traditional manner, property condition is a major factor. Even when purchasing a property “AS-IS”, the buyer knows what he or she is getting because that condition is specifically defined by a date certain — for example, the property will be sold in its “AS-IS” condition as of the date of the home inspection. While many purchasers insist that the seller conveys the property with all systems in good working order, this is not always possible. Purchasers must sometimes rely upon their inspections and consider accepting a property’s systems and structure in their present condition.

How is a foreclosure sale different with respect to property condition? Essentially, once purchased on the courthouse steps, the new buyer is its owner. But that doesn’t mean the buyer can occupy the home; and it can be difficult to prevent damage from afar. From the date of sale to the date of settlement, much can happen with this ”new” property. The prior owner may find it difficult to part with his or her home. He or she may finally leave with all appliances, wiring, walls and drywall. Squatters may find it a comfortable place to crash for a few months. Vandals may like the windows and doors.

Can the buyer tell the bank to fix any damage discovered after the sale? Not a chance. Buyer beware. Accordingly, if you’re going to invest in foreclosures, you must factor this potential surprise into your financial analysis of a foreclosure purchase.

TRAC’s auction sales are much different than a foreclosure sale with respect to property condition. Our standard real estate contract of sale contains certain language which should make every buyer more comfortable. For example, the risk of loss due to fire or other casualty remains with the seller until settlement. This means the buyer does not need to (although he or she may if so desired) purchase hazard insurance for the property until settlement; and if there is a loss it is the seller’s responsibility to bear it and repair it. The standard sales contract also provides that the property is being sold in its “AS-IS” condition as of the sale date.  Thus the seller must deliver the property in substantially the same condition as the buyer sees it on auction day. When read together, these two provisions go a long way toward eliminating doubt as to what a purchaser is going to get on settlement day. Auction buyers should definitely consider these issues when deciding between one of our real estate public auctions and a foreclosure purchase. 

–Tom Gimer, Principal/Counsel, x111

Our signs may be purple, but TRAC Auctions is going green with ecoTRAC^tm….

These days there is considerable pressure on businesses to make a minimal impact on the environment. We have a new program we’re trying to spread the word about — ecoTRAC^tm. Our ecoTRAC architectural reclamation auctions save items that would otherwise be sent to a landfill and turn them into cash for sellers and valuable building materials for buyers.

How does the program work?

1. The client identifies a property and construction timetable
2. We inspect the property and determine which items can be offered at auction
3. We provide simple paperwork
4. We target the buyers and provide for both online and live bidding on items
5. Items are sold intact and subject to immediate removal by the winning bidder
6. We account for the client’s funds
7. The environment appreciates all of us
8. TRAC recognizes participants on our site and in other media for their green efforts

What can be sold?

• Appliances
• Cabinets
• Doors
• Windows
• Moldings
• Light Fixtures
• Fireplaces
• Stairways
• Furnaces
• Hot Water Heaters
• Plumbing
• Wiring
• Circuit Breakers
• Fuse Panels
• Decks
• Exterior Fixtures
• Stone, Slate, Tile
• Brick and Block
• More

ecoTRAC auctions are conducted on both residential and commercial properties. Fees vary by property type and size but our fee structure is extremely reasonable and sellers always make out better with us than without us. Less waste plus cash in pocket is clearly a win-win.

TRAC will recognize all participants in the ecoTRAC program on the TRAC website, including a monthly spotlight of a “green” vendor on the homepage. In the real estate business and want to get involved in helping the environment? Come join us!

Tom Gimer, Principal, x111

States and counties charge a tax for the recordation of deeds and mortgages in the land records. When real estate is purchased in the Washington, DC metropolitan area, one of the biggest expenses for the buyer is his/her agreed share of the state and local government transfer and recordation taxes. Depending upon the jurisdiction and the allocation between buyer and seller, these items may add up to 2.9% of the purchase price.

Governments fattened their pockets during the first half of this decade with taxes and fees resulting from elevated sale and refinance activity. However, when the market turned south many found that they were dependent upon that revenue to fund their ever-growing budgets.

Transfer and recordation taxes are based upon the “consideration” given for real estate. Most of us would agree that the “consideration” should be the amount paid for the real estate, i.e., the purchase price. Not so with many local tax offices! When a property is sold for less than the tax assessed value (a very common scenario in this declining market), some tax offices will tax the deed on the greater of (1) the purchase price and (2) the tax assessed value. Pay less than tax assessed value for a property but get taxed on the higher figure? Consider the foolishness.

The purchase price, not the arbitrary “value” attached to a property by a tax assessor some time ago (perhaps in the middle of a rapidly-rising market), should be the basis for the calculation of transfer and recordation taxes. Those local governments which hold otherwise should re-evaluate their stance on this issue — they are chasing away buyers and alienating their residents.

–Tom Gimer, Principal, x111

Is there a better way to get auction-related questions answered than asking an auctioneer directly? Probably not.

Our TRACfaq system is an easy way to get your questions in front of Paul Sobwick, CAI, AARE, CES. Those designations — Certified Auctioneers Institute, Accredited Auctioneer of Real Estate, and Certified Estate Specialist — mean that Paul likely has a good answer to any auction-related question you may have.

What’s great about this system is that every answer we post becomes a part of our searchable database. By participating you’ll give other auction buyers, sellers and agents a little auction education!

So go ahead… Ask the Auctioneer!

A couple years ago, we outgrew our copier. It didn’t break… it worked fine. We just outgrew it. I couldn’t convince any of our employees to take it. None of our neighbors on the floor wanted it. It was too big to put in the dumpster, and, besides, it worked fine.

I asked an assistant to call some junk removal companies. $100 was the best quote she received.  Three days later, we paid $100 to have a perfectly good copier removed from our office. The whole concept bothered me.

So here I am a few years later thinking about how to make the best use of our online bidding platform. We built this system to allow absentee online bidding on our real estate inventory, but the reality is it can be used to sell just about anything. We’ve enjoyed watching it expand from real estate into related goods and services and more.

Just last week I had 2 sit downs with owners of real estate which we’ve since signed up for auction. Both of them had baby grand pianos in the house; and neither of them had a clue what they were going to do with the piano. “It’s a fixture. It stays with the house,” said one. “I don’t care what happens to this thing,” said the other.

Let’s say your prospective buyer doesn’t want a piano in his new family room. Are you prepared to spend the money to move it? Remember what it cost me to have an old copier removed? Thinking about pushing it outside on trash day? Good luck!  Or perhaps you’ll just plan to advertise it for a “quick” sale? I have a better idea….

Just Take It Away.  Post your large, heavy, unwanted yet (perhaps) valuable items in the Take It Away section of our site, where retrieval/removal of the item is always the responsibility of the buyer. Save some money, make some money, feel good and be done with it!

–Tom Gimer, Principal, x111

We like to get the word out concerning upcoming auction properties as quickly as possible. And, as many of you know, we love to pre-sell them!

Because it often takes us a week or so to plan and coordinate all initial aspects of a targeted marketing campaign, and because our online bidding platform requires a live auction finale to be scheduled before we can start the auction, we now provide PREVIEWS through our online store.

Click here to visit our store.

Once a property is enrolled, we’ll post it in our store. We may also allow registered users the opportunity to make offers for these properties right away. This accomplishes two primary goals: 1) it gives our sellers realistic expectations come auction day as to the perceived value of their property; and 2) it allows us to track the interest level for an auction.

We encourage you to visit our store to see what’s coming up next… and also to let us know what you think a property is worth. You never know, many of our motivated sellers would rather sell now for a reasonable price than wait until auction day.  We look forward to hearing from you.

–Tom Gimer, Principal, x111

We’ve been telling folks for years that auction marketing would continue to increase in popularity. Some time ago the National Association of REALTORS predicted that auctions would comprise 20% or more of all real estate transactions by the year 2010. We believe current economic conditions are accelerating this trend and that the numbers will be higher, sooner.

Why?  Because auction companies like TRAC do more than just sell properties…. we are real estate problem solvers. And there are plenty of problems out there. During our weekly sales meetings we devote significant floor time to discussing ingenious new methods of moving real estate in difficult markets. As a result, properties that before might have seemed impossible to sell have been given new life. Today I would like to briefly highlight one of these methods, a program we developed which is called “the Full Disclosure Auction.”

In the Full Disclosure Auction, we take on a real estate problem which is prevalent in the Mid-Atlantic: a seller owns property which has a value roughly equal to or slightly in excess of the current balance of all mortgages and liens on title.  Some REALTORS® may look at this situation as a short-sale opportunity. We don’t… not just because short sales are tedious and unpredictable and lenders are often unresponsive, unreasonable and uncooperative, but because a short sale puts no cash in the seller’s pocket and solves little in the credit and credit reporting context. Instead, we look at this as an opportunity to provide an exit strategy which addresses these issues while at the same time requiring us to drive bidding above and beyond the level required to pay off existing liens in order to earn our pay. That’s right, we often structure these transactions in such a maner that we take the risk that even with a successful sale, we may earn little to no money.

With a Full Disclosure Auction, the seller authorizes us to post the reserve. Thus there is no mystery on the buyer’s side as to what price will be required to own the property. Further, as stated above, the auction company earns money only if it is successful in driving bidding north of the posted reserve. How can we make such a deal work when other real estate professionals cannot? Analysis, investment and targeted marketing.

1. Analysis: we perform our own evaluation of each property and the surrounding market. We accept only those properties which we feel have a high likelihood of a successful sale based upon all of the circumstances.

2. Investment: the TRAC team invests significant time, energy, money and more into each property to present it in the best possible light. If site cleanup or repairs will enhance the value, our team will take on the work.

3. Targeted marketing: buyers must be located and drawn to participate in the auction. Depending on location, value, and other factors, we assemble lists and reach out to each prospective bidder directly. We create the interest and urgency necessary for a successful sale. We pre-sell a large percentage of properties enrolled in these auction programs as a result.

This program is just one of many we offer our sellers. If you are a seller and it sounds like a Full Disclosure Auction or some other method might solve your real estate problem, please feel free to contact us to discuss further.

–Tom Gimer, Principal, x111

The third Saturday of April marks a special day in the lives of Auctioneers throughout the United States, National Auctioneers Day.  Paul Sobwick and TRAC will join fellow Auctioneers and celebrate this annual event on Saturday, April 18, 2009.

One of America’s oldest trades and the last bastion of the competitive free enterprise system, auctions and the age-old profession of auctioneering continues to grow. Auctions thrive in today’s economy with approximately a quarter-trillion dollars in goods and assets sold annually at live-auction in the United States.

Consumers enjoy the thrill of an auction. Auctions are an effective and efficient means of turning assets into cash quickly. TRAC’s focus has been on real estate auctions and associated personal property, along with estate liquidations. With our recent award of the Maryland State Police contract for online auctioneering of forfeited items, our site will continue to expand in scope and traffic.

From the avid weekend auction fan to the first-time buyer, TRAC encourages consumers to join us at an auction and enjoy the experience.

Once our signs go up sellers often see a huge increase in buyer interest, showings and offers. Since our sellers have retained us to assist with a fast sale on a non-contingent contract, we like to solicit offers from buyers on these terms. To make things easy, and to enable our sellers to compare apples with apples, we have a pre-auction offer package on our website. All you need to do is register with our site and this and other standard forms are available in the Real Estate Forms menu on the left column. For those prospective buyers who wish to include contingencies in your offers… just make sure you plan to remove them prior to the scheduled auction or we’ll more than likely be calling the sale!

Note: TRAC sells approximately 40% of all properties enrolled prior to auction. Don’t wait until auction day to express your interest in a property or you may miss out!