Saturday, May 02, 2009

Foreclosures: Banks Setting Opening Auction Bid Below Amount Owed

by Calculated Risk on 5/02/2009 09:02:00 AM

From Jillayne Schlicke at Rain City Guide: Why are Banks Setting the Opening Auction Bid Below The Principal Balance?

I attended a foreclosure auction in Bellevue, WA last week to discover if the rumor was true that banks are opening their bids below the amount owed. I received confirmation from three professional investors that yes, the banks have been doing that, it’s no secret, and there seems to be no discernable pattern. It’s not one particular bank or lender, it’s not particular types of property or in any specific area. It appears to be random.

... Only a few of the trustee sales attracted bidders, and the rest were deeded back to the bank. Out of the 92 active sales, 25 had opening bids below the amount owed to the bank.
Jillayne offers some possible explanations why the banks are bidding below the amount they are owed. I've been hearing similar stories in California.

Also, here is the monthly post: April Economic Summary in Graphs.