How I bought a foreclosed house

Strike one

Sure enough, no one bought the red-door house at its auction price. I began to check the real estate listings online several times a day, ready to put in an offer as soon as it came to market.

I knew from my reporting for the paper that the "vulture" investors who bought foreclosed houses followed several rules. If a house was listed at a low price -- and banks now usually list them low for quick sale -- one should offer at least 90% of the asking price. Just as important as the price are the terms. An offer of a speedy escrow, say 15 days, is an added sweetener. The house has to be bought as is.

An all-cash offer is best, or one with no loan contingency. Remember, the lender-owner doesn't have time to haggle over the price and does not want to risk a buyer's backing out after being denied a loan. It's also best to put in an offer as soon as the house is listed for sale.

The red-door house came to market at a price about two-thirds the amount of its previous loans, and about $250,000 less than what nearby houses had recently sold for.

The day after it was listed for sale, we offered $10,000 above the list price, with no loan contingency. We didn't get it.

I smell a rat

The selling agent told us we lost out to a buyer who offered a lower price but agreed to an all-cash purchase. Win some, lose some, I thought.

But after a couple of days, it all seemed strange to me. I had not put in an all-cash offer, but my offer did not have a loan contingency, which was in effect the same.

Then I remembered something else vulture investors had told me. Sometimes, brokers selling houses for banks tell favored agents in advance about houses they are about to list. This allows the favored agent to submit a can't-miss offer immediately after the house is listed.

I suspected my offer was never shown to the bank selling the house. When I called the selling agent to ask, he wouldn't answer my questions directly and quickly hung up.

I sent an e-mail to the head broker of the firm selling the house, telling him I wanted proof that my offer was shown to the seller or I would file a complaint with the California Department of Real Estate.

The broker, who had recently come off suspension by the department, phoned me and pleaded with me not to file a complaint. He offered to find me another house and said he could even put my agent on his list of those he notified of upcoming houses for sale. But he didn't provide proof he had presented my offer to the seller.