Wednesday, February 27, 2008

Foreclosure Auction

How would you like this job? Would it be worse than being an undertaker? It's kind of depressing to make the final decision as to when a person's home is taken away. It's true that the auctioneer wasn't the one who decided to borrow more than he could afford and then not make the payments. Yet I wouldn't have warm fuzzies at the end of every work day after officially taking kids' homes away from them. As an undertaker, at least you're doing something to comfort a family in mourning. You didn't kill the deceased. He came that way. It seems that, as a foreclosure auctioneer, your killing hopes and dreams, even though none of it was your fault.

I remember when my husband and I decided to thoroughly investigate the possibility of buying foreclosures. It was around 2003 or so and the first step I took was to buy a book on the subject and read it, front to back, in a matter of days. I took notes and researched at the library and on the Internet. We didn't want to be in the market of preforeclosures because of the work and competitiveness (remember all of the "We'll Buy Your Home in 3 Days!" signs?) involved in attempting to contact people who had fallen behind on their payments, and trying to convince them to sell their homes to us. We were attracted more to the process of purchasing foreclosures.

However, our analysis wouldn't be complete until we attended a foreclosure auction. We figured that we would talk to some pros there and get the scoop on how it worked--and whether or not there was any money to be made from it.
When the appointed day arrived, we drove to downtown San Diego and saw the people waiting on the steps of the courthouse for the auctioneer. Several men carrying clipboards were milling around. We found a parking space (wheels crimped, less than 18 inches from the curb, and a full parking meter--because if you park illegally in downtown San Diego, you'll have a ticket from one of the gazillion meter readers in about 23 seconds flat). Then we bounced over to the small crowd.

We walked up to the closest victim gentleman, smiled, said "Hello", introduced ourselves, and stuck our hands out for a nice, firm handshake. The guy looked away. No salutation. No smile. No shake. Just turned around. We figured that he was having a bad day (at 9:00 in the morning?). So we sprung over to the next person. Same thing.

At first, we didn't understand what was going on. We had been holding free seminars for our friends and others in order to show them how we were buying real estate. I simply gave away comprehensive lists of vendors, web site addresses, and areas that we had researched. I spent hours working on a form that highlighted all of the important aspects of investing that we had learned. The packet we compiled was full of useful information, lease samples, and an apartment association folder. We would counsel couples one-on-one, which took much of our time. I answered myriad questions over the phone--everyday. What good would it do me to keep all of that information to myself? I figured that there was enough real estate to go around for everyone.

It was obvious that the foreclosure regulars didn't have our same philosophy in the sharing of specialized knowledge. We approached each of the five or six men until we finally found someone who would talk to us. Unfortunately, he was one of us, so not very helpful. The auction started and that's when we figured out why these people acted as they did. Every single one of them were employees for large companies that were picking up San Diego foreclosures at the time. There were very few houses available, and many on the list were postponed or canceled due to payments being made at the last minute. These workers were afraid that we wanted them to tip their hats as to the amounts they were bidding and for the estimates of repairs needed on these properties. How sad.

We left feeling that we didn't want to take part in something so competitive. These employees were paid to spend their entire time researching each foreclosure and then hanging around the courthouse to try to acquire the best ones. With the responsibility that I had at home, I knew that I'd never be able to compete with that. I also didn't like their attitude. I figured that it may rub off on me if I spent time with them, and that wouldn't benefit anyone in my household.

So we crossed foreclosures off of our list and determined that, eventually, we'd find the right income-producing real estate investment vehicle for us. Unfortunately, two years later, we decided that apartments were the way to go, and the rest is history.