Foreclosure Properties Auction Sales Soaring in Phoenix
Foreclosure properties auction sales in Phoenix have been soaring because of the prevalence of drop bids, according to realtors and foreclosure-trustee lawyers.
Drop bids occur when prices for some foreclosed homes are dropped below the advertised opening bids just minutes or hours before the auctions. Only buyers tipped about the drop bids are able to snap up the properties before they are sold at the scheduled auctions.
Because of the soaring number of foreclosure homes being sold off at public foreclosure auctions, drop bids have not been noticed by other bidders over the past months. But soon real estate agents and unsuccessful bidders came to know of the drop bids when the properties they were targeting were missing during the auctions.
According to court-appointed trustee attorneys, the practice of dropping advertised minimum opening bids with only a few buyers knowing the drop is illegal in Arizona.
Traditionally, the minimum bid for any foreclosed property in a court-supervised foreclosure auction would be the unpaid loan balance. But lenders were forced to lower the minimum bids when foreclosure properties were overloading the market and homes auctioned off were not being sold. Investors and buyers refused to buy the homes when sales prices were based on the loan balance, saying they could not profit from their purchases at high sales price levels.
According to observers, it was not clear why lenders would lower the minimum bids just before the foreclosure properties auction, instead of simply lowering the advertised minimum bids.
The practice of dropping bids just before the scheduled auction is illegal in Arizona because it hurts former homeowners, other bidders and other lenders. With drop bids, previous homeowners using other parties to take back their foreclosed homes are not given the chance. Other bidders who have researched and planned on buying certain properties lose the chance of owning the properties. Additionally, other lenders selling homes are forced to compete with the bargain prices of drop-bid properties.
In Arizona, lenders cannot complete their foreclosures on properties without first notifying owners of the scheduled sale of their properties in a trustee auction and without holding the announced trustee auction. Lenders and their trustees must also announce the opening bids the day before the auctions are held at county courthouses or at the offices of trustees.
However there are no county or state agencies that monitor every foreclosure properties auction. Hence, trustees and lenders can drop minimum bids any time to achieve their ends.
