Trustee Deeds are not comps!
Foreclosure auctions are generally held on the courthouse steps at a designated time. The mortgage holder will set the starting bid, usually the amount owed on the mortgage. If the loan balance is so high that no other bidders are interested, the mortgage holder takes back the property for the loan amount. The sale is recorded as a trustee deed. Maybe values have declined steeply, so here’s a property that has a real value of maybe $40,000, with a recorded trustee’s deed for $89,000.
I receive a lot of emails and from investors pitching properties. I am sure many of you do too. Everyone wants to make a fortune in real estate, don’t they? Having some degree of market knowledge after 14 years in the business, some of the deals look pretty good to me. Some are way out of line. I took a little time the other day to track down how these folks came up with their numbers, and bottom line was Trustee Deeds. Here’s an example of recorded deed info:
Property A
4/30/2010 -Â X to Federal National mortgage Association for $73,521 (Trustee Deed – Foreclosure on the Courthouse steps)
7/1/2010Â – Federal National mortgage Association to YÂ for $19,205 (Fannie Mae foreclosure sale to individual)
Guess which “comparable” the pitchman used.
So I don’t have to tell you investors out there to do your research before you sign the contract, do I?
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What do you think? Leave your comments.