Around 2015, we attended several foreclosure auctions in Alameda and Sacramento counties. What I noticed was that bidding wars often erupted, with people getting really excited about the houses. They would keep adding $10k, and auctions ended up going for about 10% over the average prices of similar houses in those neighborhoods. There was a rumor that auction prices were low because people didn’t know about these auctions, but I think that was probably from decades ago when the internet wasn’t around. Now my spouse found another house that will be auctioned in Alameda County. The Zillow prices for houses around it are between $1.1M and $1.3M. My spouse can only spend a little over $800k. Is there any chance that this foreclosure auction will end up at $800k, or should we just forget about it?
Does he have cash? Auctions at the county steps usually require cash because they aren’t open to financing.
I would expect those auctions to be below market due to (1) needing to pay cash and (2) selling as-is with no inspections. Cash buyers are usually investors looking to buy below market prices, especially with the risks involved in as-is sales. When I went to a car dealer wholesale auction, the cars weren’t inspected and sold below wholesale prices. They were trade-ins too old or with high mileage to be on the dealer’s lot. Sometimes cars were pushed onto the auction floor because they wouldn’t start. You could face similar risks with properties, like issues with drains, wiring, or missing fixtures.
If you don’t show up, I can guarantee you won’t win. Go to see if no one else shows up and put in your highest bid. The final price is determined by the buyers and their plans. I know a family that outbid a developer because they were planning to stay in the property for decades. The flipper couldn’t make a decent profit from their investment. Just remember, if you want to be a legit bidder, you’ll likely need to put in a deposit and show proof of your ability to pay. No one can predict the final price, though.