Tuesday, February 22, 2011

Subtle 'Under The Radar' Foreclosure Sale Bid Rigging Racket, Or Mere Familiarity With Competitors' Business Models?

In Denver, Colorado, The Denver Post reports:

  • Though fewer and fewer properties are left to be picked over at weekly county foreclosure sales — most are kept by banks — the leftovers aren't generating the rabid bidding wars one might expect. Instead, the handful of private investors who regularly attend the weekly public-trustee sales are landing properties for just $1 over a bank's minimum bid to keep them — and without any competing bids.

  • And even though six or seven investors will have registered to bid on a single property, more often than not, just one will make the $1 offer and win the auction, according to bidding records.

  • Some investors say it's because the properties simply aren't worth more than that, while others say they're just not interested in a buying battle that can needlessly run up the auction price — ultimately eating away any profits.


  • Yet not once in the past several months of sales has a private individual — someone not in the foreclosure-buying business — been able to land the same deal, foreclosure sales records in several counties show.

  • Despite appearances, several investors said there's no mystery in how the sales have worked out — and public trustees agree — that it's merely the result of familiarity. They've done it so often against the same opponents that when they walk into a sale, they have a fair picture of who's likely to bid on which properties and how much they're willing to pay.


  • To prevent any rigging of bids, buyers are prohibited from using body signals that could be deemed collusive in nature during the auction — winks, nods or any other motion to convey a message.

  • "Anything that would compromise the fairness of the system is simply not allowed," Adams County Public Trustee Carol Snyder said. "We'd like to believe it doesn't happen, but there's nothing we can say about what happens outside our doors."


  • "We see each other at the sales week after week, and you get to know what each other buys," said John Veno, owner of Colorado Res Works LLC. "I might not know their names, but I know their companies." The key, Veno said, is knowing the business model of his competitors, something that becomes evident over time.

For more, see Mysterious lack of bidding wars plagues foreclosure auctions (Among the few bidders at county foreclosure auctions, some nab houses for a dollar more than the minimum bid).

Go here for other posts & links on bid rigging at foreclosure and other real estate-related auctions.

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