What I Know About Foreclosure

So as I mentioned in this post, when I went to bid on my first foreclosure, a strange thing happened to me. I was offered $5k just to go back home. Now, I may be young, but I’m not too young to know that ‘free money’ doesn’t exist and if something seems to good to be true, it probably is.

But let’s take a few steps back, shall we? When I walked into the Orange County (NC) courthouse on that fine Spring morning, I was going to outbid (called an ‘upset bid’) the high bidder from that actual auction that had occurred on the courthouse steps more than a week before. What I couldn’t figure out was why a condo that was worth somewhere in the neighborhood of $100k was selling for a measly $20k. Did no one else come to that auction? Was this sole bidder just going to walk away with this place because nobody thought there was any money to be made in foreclosures? As it turns out, no. That was not why the high bid was $20k. Not at all.

So when I walked into the courthouse that morning, I headed straight for the office of the Clerk of the Court, which is where all the bid forms are kept. I had brought with me a deposit check for 5% of the total bid that I was going to place, which was in turn, 5% more than the previous high bid on record. Both of these are mandatory amounts in the state of NC, I’ve listed those and other rules here. Anyway, as I walked up to the office of the Clerk, I was approached by a disheveled-looking man, probably in his mid-40’s. At first glance he appeared something like a vagrant; his hair was mussed, his clothes ratty and worn, and he most certainly did not look as though he had showered this day — perhaps not even for a couple of days before. Nevertheless, when he began speaking, I knew he was not going to be asking me to spare 50 cents. He introduced himself as “Bob” and was quick to launch into a story about how his mother had terminal cancer and he needed to buy this condo so she could come live near to him. He did not have a lot of money to spend on the place, he continued, but he would give me five-thousand dollars if I would just let him purchase the property at its current price.

Now this is a pretty good story, and I am most certainly not a ‘cold-hearted’ kinda guy, but something didn’t ring true for me, and it was this… When ‘Bob’ introduced himself to me, I recognized his name because it had been on about 10 of the properties that had come through the court in the last 6 months. Remember, I had been logging the outcomes of these auctions for 6 months before I ever decided to try to buy anything. In this case, that paid off because I was able to call his bluff. In the end, and in the interest of prudence, I decided not to bid that day, but also not to accept monetary compensation for my inaction. It was one of the best decisions I’ve ever made.

What I did agree to do was meet ‘Bob’ at his house later to discuss all of this. In the meantime, I went to ask my attorney about the legality of accepting money in exchange for inaction. My attorney told me that it was possibly legal, but treaded on the line of some anti-trust crimes (collusion, price-fixing, what-have-you). I resolved that it wasn’t for me, but still went to meet with ‘Bob’ so I could get the full scoop on what was going on. The only problem? In order to find out what was going on, I had to go into the lion’s den. [”Bob’s House”]