Lured by greed and overconfidence, bargain hunters who have no idea what they are doing are making extremely costly mistakes at foreclosure auctions. Please consider Miami-Dade foreclosure auction site baffles bargain hunters.
A new online foreclosure auction system started with a mission of quickly moving a chunk of foreclosed properties while opening up the bidding process to regular folks.
A little more than a month later, some of the newcomers who bought property online say they were misled by the site and ended up spending thousands of dollars on condo liens and properties laden with hefty mortgages.
Alain Lantigua, a seasoned investor who had regularly attended the courthouse auctions, said that while he likes the new system, the shift to online sales has brought in hundreds of novices, many of whom don’t take the time to properly research a property before bidding.
“This is not simple — this is a very, very complicated business,” said Lantigua who researches as many as 1,000 properties a month and generally ends up buying only one or two. “And you gotta know what you’re doing. And if you don’t, you’re going to lose a lot of money. And people are losing hundreds of thousands of dollars a day.”
Here are a few classic examples of novice mistakes from the article.
- Sehan Thompson, a Fort Lauderdale businessman, admits he made a beginner’s mistake when he bid $9,100 for a North Miami Beach condo with an assessed value upward of $140,000. Less than 24 hours after submitting his winning bid, he discovered that what he had actually bid on was the right to buy a $9,000 condo lien.
- Samuel Sontag, a New Yorker bid $95,600 for the right to pay off a $13,000 Miami Beach condo association lien. After wiring $95,600 to the county for what he thought was a clear title to a one-bedroom condo in Miami Beach, Sontag got a call from a Sarasota woman who told him that IndyMac Federal Bank had a superior lien on the property and there was an outstanding $265,000 mortgage.
- Sylvia Belmonte, of Miami, walked away from her winning bid on a downtown Miami condo. She forfeited her deposit, losing more than $5,000.
Don’t Compete With Pros
The pros research thousands of properties and bid on only a few of them. Outbid one of the pros and you may do no better than break even. Worse yet is to bid on properties where the pros have no interest. That’s a sure recipe for disaster.
In a courtroom auction you might be able to spot the pros after an appropriate amount of time. In an online auction, it’s not so easy.
If you do not know exactly what you are doing, what liens exist on the properties you are bidding on, and what the properties are really worth, then you going to lose your ass. Moreover, even if you have researched the properties well, you will be competing against the likes of professionals who know even more than you do.
The best course of action is to assume there is no easy money in foreclosure auctions. Whatever money there is to be had, the pros will get it, not you.
Mike “Mish” Shedlock
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