Lawsuit challenges real estate auctions
A lawsuit filed in California Superior Court challenges real estate auction practices, charging that some auction companies engage in deceptive advertising and violate provisions of federal law related to real estate closing services.
"Many modern real estate auctions are nothing more than a bait-and-switch scheme to lure hopeful buyers to submit offers that can later be accepted or rejected by the lenders/sellers, despite the general public's perception that once the auctioneer declares, 'Sold,' the property is in fact sold," the lawsuit charges.
The lawsuit notes that there has been a boom in the volume of foreclosed, lender-controlled properties -- also known as real estate-owned or REO properties -- sold at auction.
Filed June 12 on behalf of three individuals who attended a real estate auction event in Southern California -- including one individual who is a RE/MAX real estate broker -- the lawsuit also charges that auction companies "direct and require the use of their settlement service providers and shift the cost of sales, including commissions, from the lenders/sellers to the consumers" in auction event signing rooms.
"The lenders'/sellers' representatives are not found in the signing room to sign the contracts; rather they are just there (to) sell loans and other settlement services," the lawsuit alleges.
Several auction companies, lenders Countrywide Home Loans Inc. and GMAC Mortgage LLC, and title and escrow companies are named as defendants in the lawsuit, which seeks class-action status.
Irvine, Calif.-based Real Estate Disposition Corp., an auction company that maintains a real estate broker's license in 21 states and Washington, D.C., and last year sold $1 billion worth of residential real estate at auction, is named in the lawsuit. This year, the company expects to sell $3 billion worth of properties at auction. Representatives for REDC, which operates the USHomeAuction.com Web site, could not be reached for comment about the lawsuit.
Other auction companies named in the lawsuit include LandAuction.com, an REDC affiliate; DoveBid Inc., which has a partnership with brokerage company CataList Homes to sell homes at auction; AuctionHouse Real Estate Disposition Services; Kennedy Wilson Auction Group Inc.; and Auction Services International Florida 100 Realty Inc.
Michael Davin, president of CataList homes, a low-cost Southern California-based real estate brokerage company, said in a statement, "I can't comment specifically on the case as I haven't read the documents. However, we will stand firm and defend our auction practices as the reserve auction method is an effective and fully legal sales process utilized for hundreds of years in the sale of many types of assets."
I also thought the winning bidder is the final winner well, this is what
auction is all about but I guess it is not so in the the real estate REO era.