Friday, April 25, 2008
REDC Foreclosures almost got me! Real Estate Auction Scam?
I have some updated information about REDC Auctions in another more rent article. Make sure to visit and read that one too! Let's Revisit the REDC.
It's time that we purchased a home. At least that's what my husband is telling me. We like being homeowners and now that the prices have fallen, home ownership (AGAIN) looks a bit reasonable. I tried to convince my husband that we should wait another year or so, but he's not buying it. So we're looking for bargains.
That's where REDC auctions came into the picture. We saw these big yellow signs on houses all around town. The whole city is a great big Open House Day. After visiting a few open houses, we go to the website . . . and we are hooked.
Yeah, we've got enough money for the 5% earnest money fee (I've been working my butt off - that's why you haven't had updates on this blog . . . sorry).
We pick out a couple of houses we like, we call our mortgage broker friend, we get pre-approved and we are ready to go right?
"Ahhh, have you looked at the Purchase Agreement Contract?" Our mortgage friend ask.
"No, not yet." I say. He knows that I always read the fine print on EVERYTHING I sign, BEFORE I sign it.
"Well, let me know when you read it," and he chuckles. Chuckles -- at ME.
I quickly download the purchase agreement and start reading, but it's long and I hate reading long involved documents "on screen" so I try to print it out. Can't. REDC has it password protected and they won't give me the password.
So, I go around them and made image files (photo snapshots) of each page of the PDF file. Yeah, it's a long process, but I did it. I print out the agreement and get my trusty partner "the highlighter" and dog gone it -- what do I find?
All kinds of statements that scream out to me, DON'T DO THIS!
No seriously, from reading the fine print I found out:
1. You need to provide 5% earnest money and have all paperwork done for a 21 day close or you forfeit the money. OK, tight deadline, but it can be done if you have all your ducks in a row. Check.
2. This is not an absolute auction -- like a regular auction. The properties has a reserve and the lender/seller has 15 business days to decline the winning offer. If they decline, you get your earnest money back in a few weeks. Not fair but they're covering their butts, but OK.
3. You will never get the starting price on the property. There is a secret reserve that must be met. And the seller or REDC will not tell you the "secret reserve." I hate that method of auction so much, that refuse to use the "reserve price" stuff on my E-BAY auctions. But I understand because they're not trying to sell a $500,000 house for $1, OK.
4. The seller is allowed to use fake (shill) bidders to insure they meet those secret reserve. But here's the rub . . . they are allowed to used unidentified fake bidders at the auction, so you -- the bidder -- don't know who you are bidding against.
You must be out of yo' mind!
I can not believe that this is even LEGAL,
Hell, I know it's not ethical,
And it definitely makes no sense. . . I can't believe thousands of people are going for this!
Wait a minute, wait-a-minute, wai-a-minent . . .
So basically, as a winning bidder you give a minimum of $5,000 in a cashier's check to strangers, you bid against the seller who has a multitude of "secret agents" pushing the price of the property higher and higher . . . and you have no idea how high the price will/can go. And the seller still have 15 BUSINESS DAYS (that's 3 weeks folks) to deny or accept your winning bid? Then they may give you back your deposit/earnest money in a few weeks . . .
Ahh, I don't think so.
Stay away from the REDC / USHomeAuctions.com auctions. As I told my husband, the deals are coming. Just have a little more patience.
Want to know what others are saying about REDC auctions? Here's some interesting discussions on the web:
SD Lookup.com on REDC Auction
Discussion of REDC Auctions
A very enlightening discussion of REDC Auctions
UPDATE: I have updated information about these auctions in my new article: Let's Revisit the REDC Auction. Take a look at it and give me your opinion. I am really interested. Drop a comment please!