How To Get Houses Cheap At Auction

Trustee Foreclosure Auctions and Drop Bids

When a lender posts a Notice of Sale amount (often referred to as the minimum bid) and then drops the amount hours or even minutes before the opening of the auction, this process is known as a drop bid.

Lenders are however encouraged to post the Notice of Sale amounts for foreclosure properties that will be sold at the trustee sale at least 24 hours prior to the start of the sale.

Drop-bid purchases enable the few who know about the deals to buy homes and quickly resell them for hefty profits…  Buyers aware of the “drop bids” scoop up the houses before other bidders know about the price drops.”

No one seems to be sure why banks would choose to lower the minimum bid without adequate notice.  The uncertainties surrounding properties coming to auction may have more to do with last minute price changes than anything else. Lenders are inundated with foreclosure properties, and of the hundreds or thousands of properties slated to be auctioned off at any particular trustee sale, only a few dozen may actually make it up to bid. The rest are postponed, canceled, reinstated, etc. All the aspects of the sale, including starting bid price, are constantly in flux right up until the last minute.

Most importantly, notice that the lenders are lowering their minimum bids at the auctions on average 36% below the original   ublished notice bid. Proving that there are “instant short sale approvals” happening every day, right now at the courthouse steps.

You can see why I am so excited about the potential for us to make healthy profits from buying at the Trustee Sale Auctions!


The main advantage of buying at a trustee’s sale (foreclosure auction) is that the moment a property reaches the actual sale date,  all trust deeds (loans) junior to the foreclosing loan, below the loan with the asterisk (*) on our report, are wiped off the property. This can create instant equity. The winning bidder at this auction will pay off the loan with the asterisk with his/her winning bid amount and will then take title subject to (take over payments on) all trust deeds above the asterisk (*) if there are any.

The approximate bid figure is only the current balance of the foreclosing loan (loan with the asterisk). This figure includes the loan principal itself plus back payments, penalties and foreclosure costs.  At the Trustee’s Sales, all bids are in the form of cash or cashier’s check. You are only paying off the loan with the asterisk. You then take over payments on any loans above the asterisk (if any). Again, all loans below the asterisk are wiped off the property.

The big problem is that for an investor who wants this type of bargain deal, you must track housing data, looking for these so-called “drop bids.”

 As an example of how drop bids benefit a professional investor,. The property’s opening sale price was around $174,000, but sometime before the auction… The bid was dropped from $174,907 to $55,000.  

OK, that might sound like an irresistible deal, but there’s no way that you, the casual buyer, will ever know about it. Even  rofessional investors wouldn’t have a clue, unless they got the inside scoop, which is probably why only one person was around to bid on that $55,000 house in the first place. You can see

If you want to get the inside track on those deals, it helps to know a company that constantly compiles data for clients who make a living at these auctions. The moment these companies see a drop bid, they can send an e-mail blast to the investors .

Here’s the thing, the data is public for everybody. You just have to know where to get it. If somebody wants to call that unfair, well, I guess they could call that unfair. But we don’t think it is. There’s just sheer volume. We’re dealing with, not a few hundred  oreclosures; we’re dealing with thousands of foreclosures. Things are changing fairly quickly out there.

Banks are working right up until the final moments of the auction. Loans get modified, people file for bankruptcy, sale prices need to be adjusted. And all that’s hard to do in a timely fashion as the banks scramble to clear their books of millions of delinquent properties.

If an investor does not know something  about the property they wants, they are going to be simply outgunned. And since most investors have  never heard of drop bids, chances are you are already at a disadvantage.


Are you Bidding in LA County?

There is No Reason Not To.  Here are a few of the drop bids Coming Thursday and Friday of this week.

Place your bids today.

Address                    City    Lot         Sq Ft   Zestimate   Amt Owed  Opening Bid   Discount

MOORPARK ST   ENCINO    10250   2065      $685,100     $977,900   $491,060    $486,840

STRADELLA RD  LA  32670   2128  $1,206,400   $1,153,788  $675,000    $478,788

VERDURA AVE    DOWNEY   12350  4944   $1,151,200  $975,332  $522,000   $453,332

4TH AVE                  LA           7492  3256  $689,400   $779,037 $345,000  $434,037

What are you waiting for?


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