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The hubzu website often has properties for bidding that state "this is a value-based foreclosure auction, which means the beneficiary has provided a bid based on market value".

However, it then states: "This is a great opportunity for buyers since the final reserve may be priced at or below current market value."

These statements seem contradictory to me, so I think I must not understand the first statement properly.

I believe the first statement to mean, for example: Beneficiary "Todd" has a property which he reasonably believes based on market conditions to be worth, say, 55,000 USD. So as I understand the first sentence, Todd has already provided (or will provide) a bid of 55,000. Therefore, 55000 is effectively the minimum bid if one wanted to attempt to acquire Todd's property which Hubzu.com is auctioning.

Other things I have assumed or seem apparent: The terms "market value" and "current market value" are interchangeable since "current" would be the default implication anyway. Second, I assume the final reserve would be something somewhere at or below Todd's bid. I did assume that the market value is not the final reserve, but some lower value. However, I cannot see the purpose of a final reserve in this situation...

If so (and why I think my understanding is flawed), it is not possible to buy the property below the market value because, even if a buyer were to bid above the final reserve, but below the market value, Todd would win the bid and retain ownership.

I have tried to google this terminology in various manners. Here is the latest search 'define "value-based foreclosure auction" -hubzu'

Can someone produce an example that demonstrates what this means and how a buyer could reasonably buy this property below the market value?

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  • $\begingroup$ "a bid based on market value" is not the same as "a bid equal to market value". The seller, whatever their initial bid is, cannot dictate the market value of the good they are selling. Their bid can at best serve as an indication of their private value for the good. $\endgroup$ – Herr K. Aug 11 '19 at 19:56
  • $\begingroup$ The obvious fact that a seller can't dictate the true market value of a specific property is not important to my question. The market value is arrived at using normally logical means (professional realtor or appraiser, recent comps, past sales, etc). These values are usually pretty close to the final selling price. I.e., it is not based on their personal "private value". A property (properly evaluated and researched) has a specific range it will likely sell for. No reasonable person would try to sell a 90-100K property for 200K because it is "worth" that to "them". $\endgroup$ – user23965 Aug 12 '19 at 12:28
  • $\begingroup$ However, if "based" means a "percentage" of market value, that could make sense. $\endgroup$ – user23965 Aug 12 '19 at 12:33
  • $\begingroup$ Looks like you've answered your own question. $\endgroup$ – Herr K. Aug 12 '19 at 17:32
  • $\begingroup$ No, that does not answer it. I also don't think that is the intent. Otherwise they would have been more clear about it. I can see I chose the wrong forum for this. $\endgroup$ – user23965 Aug 12 '19 at 19:26