RSS FeedMy Morning At A Real Estate Auction
This morning, I attended a real estate auction in Friendship Heights. I discovered that two properties in our neighborhood were on the list to be auctioned off, so I wanted to see how they performed at auction. I also came prepared with a deposit check – just in case an opportunity presented itself. 
I walked into the office and took a seat amongst the rows of chairs at about 15 minutes before 10am – the starting time of the auction.
The first contact from the auctioneer consisted of several “kill” announcements. This means that properties were being taken off the auction block just minutes before they were supposed to be auctioned off. At the time the first kill came, about 9:55am, there were a little less than a dozen people present. The first kill was some random property that I don’t think anyone was interested in. A couple of minutes later, about 3 more kills came. The auctioneer began the announcement with, “The 7th Street at 10:12am” and one gentleman shot a shy smile at his friend across the room. I think there was a collective “darn!” as soon that announcement came. Two other properties in our area were also killed: one on Mass Ave, and another at 5th & Q St NW. I had been there only 15 minutes and I was already ready to leave. But, I thought it would be a good experience to at least stick around to witness one round of auctions.
Just after 10am, the room was packed with 2 or 3 dozen people. All of the chairs were taken up and people were standing along the walls (one person commented, “it is busy today!”). Finally, three properties were announced to be auctioned off. They all had deposit requirements of over $30K, so the auctioneer asked if anyone was interested in bidding and to verify their deposit check. Only one gentleman said yes. The auction commenced and the gentleman did not bid on any of the properties. After that, I headed for the exit!
Before the auction started, I tried to figure out what every bidders’ intentions were. I was obviously only there to bid on the 7th street property and I think a few other people were there for the same single purpose. Two women who arrived after the 7th street property had already been killed, were very disappointed when it was announced for a second time. As mentioned earlier, one gentleman meant business and had a large deposit check in tow. Some people in the back of the room sounded like they had just gotten out of a class that taught how to buy foreclosures; they were learning the ropes. Others just appeared to be there for the entertainment.
One valuable lesson learned from the experience is that some of the auctions that look like really good deals are actually for 2nd trusts (loan). Meaning that if you win the auction on a 2nd trust, you would also have to assume the full value of the 1st trust (the larger of the two loans) to actually own the property. The past 5 years of loose lending seems to have eliminated the possibility of finding a good deal at a foreclosure auction. Most of the properties had loans that were probably near 100% of the value.
In the past 5 years, there was little reason to go into foreclosure – as long as you had equity in the home, you could easily get cash out to pay for anything – including your mortgage payments. But, if no equity is left, foreclosure is probably the most appealing option. Those lending actions basically torpedo any possible “deal” at a real estate auction – no bidder wants to assume the full value (or sometimes more than the full value) of a property.
Realizing that this was probably a waste of time, there was one notable lighter side of the experience. As one person was discussing the list of properties, I couldn’t help but grin when I overheard the potential bidder say, “That 7th street property is in Gallery Place. That’s *nice*!”
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Comments
Fascinating!! I remember when I was condo-shopping, I was looking at a unit in Friendship Heights. I Googled the address and discovered it was scheduled for auction that month! The seller’s agent said he had no idea. The whole thing just felt kind of weird and sketchy and…..obviously I didn’t buy the place since here I am in PQ.
But I have always been sort of intrigued by these auctions too.
I attended from the DC Gov, an auction for properties in which the taxes were not paid. Most of the property taxes were paid at the last minute, waste of time. Plus you get the property as is, sight unseen. I am wondering if there are any deals anymore.
Nice post, GPLiving. I went to a real estate auction at Weschler’s last month just to educate myself. A couple of friends went along. We were the only ones there, besides the Trustee, etc.
Similar to your experience, some properties were killed before the auction began. That’s usually because the bank has reached a settlement with the mortgagor (the borrower) at the last minute.
That left only one property. We explained that we were only there for the education and had no intention of bidding. They still had to go through the motions.
One of the Weschlers started the bidding for the bank that was foreclosing. Since none of us bid, the bank now owned it.
It was explained to us later that in these circumstances the bank has a number that they’ll bid it up to. That number may be a bargain or it may be over market price. I agree with you that in today’s market, there probably aren’t many bargains to be had at auctions.
A couple of other things about foreclosures. One is that you have to do your research to see what other liens may be against the title. You also can’t get in to see the inside of the property unless it’s still occupied, you’re bold enough to knock on the door and the occupants are willing.
Finally, if you get a property at an auction and it’s still occupied, it’s up to you to get the occupants out. That’s called eviction. Not everyone’s cup of tea!
To the poster who mentioned the DC tax sale, I am a Gallery Place resident and there are deals through the tax sale that can be had. It may be harder to find good deals in our area but they do sneak through occasionally.
Let me know if you want more info on the sale. it is held in July and I go every year and have experience in it as part of my practice.
Anon: Alex Cooper Auctioneers seems to be the major auction house for the area. Click on that link and the auction lists are on that page.
Interesting post! I’ve always wondered about these things as well. What was the 7th Street property that was supposed to be auctioned?
How shocking that Jemal pays his taxes at the last minute. Sounds like the guy’s business is operated very poorly.
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I’ve always wondered about these things, thanks much for the in depth report.