Robin Goldsetter is a savvy businesswoman. Her shop, Robin's Hair Design, has been a fixture of the Head House Square neighborhood for 30 years.
Goldsetter and her husband, Dan, a pilot, rehabbed both the South Philadelphia house they live in and a cottage upstate, so Robin decided to try picking up a property at sheriff's sale. So far, her efforts have harvested nothing but contempt for the system.
Our paths crossed during the lunch break of a four-hour Philadelphia sheriff's sale June 2. "I'm looking to buy something near our house," Goldsetter said, holding the booklet the sheriff produces each month with a list of properties and photos. "My husband has a lot of time off between flights to fix up a property, so I took the day off from work."
Goldsetter bid on a few properties she had seen, from the outside, before the auction.
Despite her preparation, she left empty-handed, as did most of those who harbored hopes like hers.
"I just don't get it," she said. "Eighty percent of listings are stayed or postponed, but the ones that do get to auction are bought by the same people or the bank's lawyers." (When they bought their $60,000 fixer-upper cottage upstate, Goldsetter acknowledged, she "trespassed" - the door was open - and was able to find the information they needed to acquire it.)
Marc Sherby of Devon regularly attends sheriff's sales in the region, is the author of How to Buy Real Estate at Foreclosure Auctions (Trafford Publishing, $19.95), and will begin a course on the process in the fall. He understands Goldsetter's frustration.
"The bank," Sherby said, "will bid up to its upset price" - what it is owed, plus foreclosure costs, back taxes, and fees. "Usually, it will announce that price before the bidding starts. That alerts everyone what that price will be that the bank will bid up to before dropping out."
Assuming no one outbids the bank, the "attorney on the writ" takes it back on behalf of the bank, Sherby says. The property is then listed with an REO (real estate owned) broker specializing in those properties.
Most are sold to investors, but Sherby warned that buying REOs can be tricky, because the transaction favors the bank. In most cases, he said, "the buyer will be asked to sign a corporate addendum, which basically says the bank can do what ever it wants up until settlement and you have no rights."
The bank can decide not to settle on the scheduled day, "and you can't do anything about it," he said. "REOs are sold 'as is / where is,' so if the property has no kitchen, most lenders won't give you a mortgage."
Other than banks, Goldsetter's chief competitors at sheriff's sales are what Sherby called "seasoned, third-party professionals," including investors and "double agents" - lawyers working for banks who bid up the prices. Thus, he confirmed Goldsetter's suspicions about other bidders.
"I don't know why the bank would want to take some of these properties back," she said. "They could do better if they sold one to me."