I just had to smile when I read the post on Johnny's blog about the foreclosure sale on, 3020 6th Street N. (http://adventuresofjohnnynorthside.blogspot.com/2008/09/notorious-address-in-eco-village-sold.html)
Johnny has stated many times in public and private that I don't have a clue about real estate investing. I don't consider his opinion to be valid at all. For Johnny to say I have no clue about real estate investing would be like a security guard telling the Chief of Police that he has no clue about being a cop.
Here's why... (see my comments/corrections in red)
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Taken from the Johnny Northside blog, Johnny wrote:
"Jeff Skrenes described for me some of the routine of a sheriff's sale under these circumstances, because it's a bit of an archane process. The idea of a sophisticated entity like Deutsche Bank ("Sophisticated" ??? Now THAT is FUNNY!) paying a quarter of a million dollars for a crack house worth, perhaps, $24,900 on the market seems...somewhat counter-intuitive. I asked Jeff, "Is the mortgage company basically buying this thing FROM THEMSELVES?" Jeff was, like, well...sort of, yes. The bid will be for the precise amount of the outstanding mortgage (incorrect) , because that is exactly how much they need.(wrong again) They don't want to bid less--say, $50,000--and have somebody else come along with that exact amount and say, "Here, I can redeem the mortgage."
The market value of a house has nothing to do with the foreclosure auction and what amount the lender bids.
The amount that the Trustee states at the sale (opening bid) is not for only the "outstanding mortgage" as Johnny claims. The lender has the right to include the balance owed on the mortgage plus, any taxes & insurance that they have likely paid (tax sales wipe out a mortgage so the lender will pay the taxes to prevent being wiped out), legal fee's, interest and penalties are all costs that the lender includes to determine the amount of the opening bid.
Note: The opening bid amount can NOT be for more than what is actually owed after everything has been included. They can offer the house for less than what they are owed but, not more.
His comment about someone coming along with the exact amount (he said $50K) and say, "here I can redeem the mortgage" also makes no sense.
The only person who can redeem the mortgage is the person(s) named on the mortgage... The homeowner. In Minnesota they have 6 months to do so and they can remain in the house during that time, rent free.
Johnny also said, "Arg. Mortgages. I let Jeff handle the ins and outs of that stuff."
It would be nice if Johnny would also let people who have a clue how foreclosures work, write about them. But, what do I know... I have no clue. Hahaha
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