Foreclosure of the Week: 555 Carlton Avenue

Ripe for another Jerry Minsky Corcoran condos project a la similar conversion at corner of Grand Ave and Gates Ave in Clinton Hill.

http://www.brownstoner.com/brownstoner/archives/2006/11/condo_of_the_da_28.php
http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=917035
http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=991882

Construction or no, guessing the developers will be falling all over themselves on the court steps tomorrow.

Posted by: webster at July 25, 2007 10:46 AM

Make no mistake about it...auctions can be very dangerous.

Note that I am only talking about properties of interest here (like the PH signature property above), not some smaller, less attractive place way off in a less desired neighborhood.

First, auctions with more notable properties are just teeming with sharks (in the form of developers or professional real estate speculators) that have done all their research on the property and have already run models on various outcomes.

Those folks know exactly how much they can tolerate, and will bid fiercely until they hit their P/L thresholds.

You have to remember that this is their daily bread and butter business, and they prepare exceptionally well.

Their price threshholds may well exceed the listed default price, and be well above what an amateur would like to buy the place for, and so amateurs run the risk of getting emotional and bidding well above comfortable levels due to very savvy, very interested professional types present.

In the end, you can't bid higher than you have liquid in hand, but folks have been known to bring more than they think they need than bid properties well over market as a result, due to strong activity by professionals bidding (who are also expecting to further elevate value on a multiple basis by putting at least some basic reno (or better) in.

As a result, amateurs may find that the bidding waters become very deep and dangerous, very fast.

So be careful.

Anyhow, enough of the caveats.

Yes, get there early.

Payment-wise, you must have IN HAND bank checks for a 10% down-payment of what you bid. The gov't only wants to have one auction process per property, and not have to come back because someone's check bounced.

To prepare for the 10% down payment, and not knowing what the final price will be yet, people often have one big bank check for what they are sure they will have to pay, and then have several bank checks (or certified checks) in smaller $1k or $5k or $10k (or whatever floats your boat) increments up to the highest amount they are willing to pay.

As soon as a bid is declared the winner, the winning bidder immediately (right then and there) meets with the auction referee to sign and settle up, and YOU MUST BE ABLE TO CLOSE THE REMAINING 90% IN THE NEXT 30 DAYS.

(sorry, caps lock stuck, heh)

Oh, did I warn you yet? :) Back to the caveat side, because people are only putting 10% down and know they have 30 days to come up with the rest, amateurs run the risk of actually bidding too high (again, based on bidding pressure from the sharks) and over leveraging themselves wit a bid that is too high (for market, and where the bank will appraise to back up their loan within that 30 days...).

So again, be careful, do heavy research regarding taking the place as-is (with respect to valuation, premium you can *really* afford above that, and amount the bank is likely to underwrite as lynchpin to your loan strategy).

Everyone else there will have done same, have liquid funds in hand, and will likely be ready to do whatever they can to land this for their business.

Okay, that's all I can think of.

I'm sure there are several articles around with similar caveats and recommendations.

Good luck.

Posted by: webster at July 25, 2007 2:14 PM

HAH!

Anonymous 2:28, my now coffee-soaked monitor has you to thank.

Btw, Tim Donaghy will be at the Brooklyn Courthouse, but for entirely different reasons. Yep, oddly enough, they are actually trying that here, despite the fact that he lives in West Chester PA.

Posted by: webster at July 25, 2007 2:34 PM

Charles,

Which post in specific are you referring to?

Posted by: webster at July 25, 2007 3:48 PM

Anonymous 5:42, I never wrote "please stay away," so I have no idea what you are intending by that.

I actually wished folks luck, and mentioned what they need to bring/do and just what to look out for.

Posted by: webster at July 25, 2007 5:59 PM

Actually, your input appears to go exactly to the (well known, not exactly rocket science) points I raised.

Posted by: webster at July 25, 2007 6:10 PM

Speaking of articles, for anyone seeking more discussion and tips, here are a few that came up by merely googling "foreclosure auctions" "how to" "new york":

Foreclosure Auctions: Bidder Beware
http://homefinance.nytimes.com/nyt/articlePrint/2006.04.09.foreclosure-auctions-bidder-beware/

Similar caveats, just because simple assumption is that these are all deals and discounts, instead of just a different channel than going through a broker (but without visit or inspector appointment to really see the place, hence part of the valuation risk I mentioned above).

Don't wanna have this post get filtered to moderation queue, so I'll post the second link below.

Posted by: webster at July 25, 2007 6:40 PM

Older, late 2005 article from Inman:

Foreclosures tough nut for investors to crack
http://www.therealdeal.net/issues/DECEMBER_2005/1133402683.php

As for property shark leveling the playing field, that plus ACRIS plus Department of Finance searches and other things are exactly the research imperative I was referring to, to be on even footing with the pros that may be present.

Posted by: webster at July 25, 2007 6:44 PM