Today's post stems from a question asked by another Active Rain reader.
Question - I am very curious about the whole foreclosure/auction process and how it relates to REALTORS (like is there any chance for a REALTOR to escape with his/her commission in fact if s/he is the person who found the property and has done the legwork and is under an Exclusive Right to Represent with a Buyer??)
Would s/he accompany the client to the auction?
Possibly there is a way to pull a property back from the brink and keep the commission that has been earned...could you do a post about that?
Answer - More times than not, the county sheriff will auction off the property on a set date at a set time. Columbus, Ohio is in Franklin County and our sheriff auctions are every Friday morning where over 200 properties are offered for sale. It is extremely rare to see an agent in the room with a buyer, although it does happen. In this situation, any commission that may have been offered by the property owner during a listing period would not be paid. The property is not being sold by the title holder. It is being sold by the sheriff pursuant to a court order directing the sale. The terms of that court order would be followed and likely will not include payment of a buyer broker fee.
If the agent had an Exclusive Right to Represent and took a buyer to the sheriff sale, they should be looking to the buyer to pay their fees.
Sometimes a lender may elect to engage a professional auctioneer to conduct the foreclosure auction in lieu of the county sheriff. I don't know if all states allow this, however in Ohio the foreclosing party has the option of the county sheriff or a licensed auctioneer. Ohio Revised Code 2329.151 states the following: "All public auctions of goods, chattels, or lands levied upon by execution shall be conducted personally by an officer of the court or by an auctioneer licensed under Chapter 4707 of the Revised Code." In this type of action, it is possible and even likely that the auctioneer is going to earn a commission for selling the property. Often, but not always, the auctioneer will be willing to pay a co-op to any agent that brings a buyer to the auction. In the foreclosure auctions we undertake, a 3% buyer broker co-op is offered.
It is possible to pull a property back from the brink and that decision will be made by the foreclosing bank. The bank will usually want a guarantee of a closing. In the situations I have been involved with, the lender will want the property to close in advance of the sheriff auction or to have the contract be non-contingent with a large non-refundable deposit tendered.
Do you have questions about distressed assets, receivership or bankruptcy sales, auctions? Email me at rfk@gryphonusa.com and I'll try to answer it in an upcoming post.
Richard F. Kruse is the President of Columbus, Ohio based Gryphon USA, Ltd. (www.gryphonusa.com). The Gryphon Organization includes Gryphon Asset Management providing receivership and consulting services in the distressed marketplace, United Country Gryphon Realty & Auction Group (www.ucohiorealty.com & www.ucohioauctions.com) providing real estate brokerage and auction services throughout Ohio and OnlineAuctionUSA.com (www.onlineauctionusa.com) providing commercial asset liquidations from the Midwest to East Coast.
United Country Gryphon Realty & Auction Career Opportunities Available. Call 614-885-0020 x 17
Foreclosure auctions are not that popular with consumers in my area. The "auction" model used by listing brokers is marginally popular although it's just another marketing technique and is "reserve" and rarely sell.
Rich, there was a big auction here in Houston last year and I went out of curiousity. What amazed me is that most of the homes sold for MORE at the auction then what they had been "For Sale" before the foreclosure.
Rich,
Great information. I am helping a relative with loan modification paperwork. She hasn't paid her mortgage note in 4 years. If there are any surprises with the new lender, I may be trying to help her sell her property before an auction date . Thanks for answering our questions.
I have wondered this as a new agent - makes me want to research more. THANKS!
The "auction" that is part of the foreclosure process in my state (Georgia) is done the first Tuesday morning each month by the sheriff. But we have had banks auction off their properties after the foreclosure process is done and still pay the agent commission and also pay any buyers agent a commission as well.
Rich,
Most properties that are being foreclosed on, revert back to the bank on the courthouse steps. The auctioneer goes through the motions though.
Rich
If you have an ERTS then I would certainly look to the buyer to get paid, especially if you were the procuring cause.
This is a very interesting question. I have never gone with anyone to the courthouse steps, but of course all bets are off as to commissions unless the Buyer is either under a contract or generous.
Auction sale,
Beside being a mortgage Loan Officer, I am also an investor looking for my next project. I recently attended the REDC auction here in Seattle.... This auction requiers your agent to sign in via the web site 24-48 hrs before attending in order to recieve a commission.
I gotta agree with Sharon on going to the court steps, all commissions are off unless you client is under contract.
Rich ~ I have been to a few sheriff auctions in the past couple of weeks, to check out the process. The commission was a big questions for me. I don't know how it works here, on the list... thank for the info.
I would suggest to any buyers interested in maneuvering through the tricky waters of a sheriff's sale to have a buyer's agent represent them and pay them for their services. You can really get yourself in trouble in these auctions if you do not know what you are doing.
I have never been and frankly would be a little concerned that I am entering territory that is foreign to me. We must be careful we can serve our clients better than they can.
Great point. The buyer would be responsible for the commission in this instance.
True foreclosure auctions in California are conducted by a trustee, and come with no warranties of title. You really have to do your homework ahead of time to verify that you are buying the property without additional underlying liens such as property taxes or other mortgages that survive the foreclosure! The other issue is that it must be paid in all cash that day!
It isn't really a good idea for most (owner-occupant) buyers, but investors who plan to flip a property can do well if they know the market, the condition, and the title issues that may be involved. Researching all of these details can be done by a knowledgeable agent, and investors are willing to pay for that knowledge, but that would be agreed to in advance with the buyer. (No commission coming from the "seller/lender.")
I have never heard of an agent being compensated at a foreclosure auction. But you could always ask your buyer to pay you one!
Thaks for answering this question. Now..any chance you could put a reblog OK on this post.?
Get the buyer to sign a form that states if for whatever reason you're not fully compensated thru the auction, they're responsible for the difference.