According to Foreclosure Radar’s April 2009 report foreclosure activity continued at a high rate for the State of California.

Highlights of the report are:

• Notices of Default (initial foreclosure notices) fell 18% from March 2009 to 43,000;  but March 2009 set a new record for these foreclosure notices.  These filings decreased by about 1% from the prior year.
• Foreclosure Auctions increased from the prior month by 35% to 13,500 equating to $6 billion in loan value.  As this is a “tailing” indicator from previous administrative and legislative delays and moratoria these auctions were still 41% lower than the previous year. 
• Almost 90% of these auctioned properties were originally encumbered in 2005 through 2007.
• Virtually all of these auctioned properties were first Deeds of Trust.  Also 88% went back to the lender with 12% going to third parties. 
• Lender discounts at auction was about 40% of the loan value.  This equates to roughly 28% less than market value.

So why not buy at auction?   Because there are a number of inherent risks which the typical homebuyer or investor might not be able to adequately assess.  These include the following;

1. Sales are as-is with no guarantees, contingencies, and limited ability to inspect before bidding.
2. Sales are subject to existing liens and encumbrances, such as unpaid taxes, mechanics liens, and judgment liens.
3. Title Insurance is not available, so any cloud on the title will need to subsequently cleared by the new owner.
4. New owner may be forced to evict the prior owner or tenant.
5. New owner will need to clean-up and repair the property.