10:43 AM PST on Thursday, November 17, 2005

By ALLEN SCHAUFFLER / KING 5 News

When banks and other lenders have to take properties back from borrowers in trouble, they want to turn around and get their money out of those properties as quickly as possible.

So foreclosure auctions take place every Friday morning in every county in the state. It’s a small, but bubbling sector of the red hot real estate market.

It sounds like something that would happen in a courtroom or the back room of a bank, but by state law, these auctions can be held outside any public building.

In downtown Seattle on morning recently, the bidding opened at $178,500 for one property and quickly edged up into the 180s.

But if you want to play with this crowd, you had better bring your nerve, your poker face and your money.

It's a sidewalk property auction featuring trustee sales of foreclosed real estate and it happens every Friday morning.

And at the end of the day, the highest bidder owns the home ... as is.

The crowd at the auction is a mix of real estate regulars, like Dean Street, and newcomers, like Carl Thompson and Dante Hill, drawn by a hot market and the possibility of sweet deals.

"This is the American dream, to come down here and strike it rich,” said Thompson.

Harlan Moore, of Key Foreclosures, agrees.

"It's the stock market,” he said, “just like the 90's, everybody wants in. Property is the new Yahoo stock.”

Street, in the meantime, has worked these auctions for decades. On the morning we caught him there, his $230,000 -- paid on the spot – bought a home in Renton. It needs work, but he sees it as a good rental property.

At a weekly strategy session, Street, advises other investors on the complex business of buying real estate that's under pressure.

“What we're looking for is a property that's distressed, whether we buy it from the owner prior to losing it or buy it at auction or whether we buy it from the institution that has foreclosed, we're just simply looking for a deal,” he says.

But, Street warns, “foreclosure is not synonymous with 'great deal.' There's a lot of bad deals being in foreclosure.”

Agent Nick Upshaw cautions that it's not easy, and points to a huge lake view home bought back at auction by the original investors.

It’s a property tangled in debt with major construction costs ahead. These are things a buyer might not know and that don’t have to be disclosed at the time of sale.

"You are buying it completely "as is, where is" whatever that may mean,” he says.

“So if you blow it by buying a pig in a poke or the title's obscured … there’s no recourse to anyone.”

Upshaw warns that a foreclosed property might have title issues. There could be IRS liens on the home or other creditors waiting for payment

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In many cases, there's no chance for an inspection.

Glen Gegen, another longtime buyer, has simple advice for newcomers: "Beware, beware," he says.

First timers Thompson and Hill came up empty at this auction. They say they understand the risks. They like the opportunities and they'll be back.

"The big guys like to intimidate us smaller guys into scaring us out, but I don’t scare that easy," said Thompson.

The old pros and the first timers agree. The key to this kind of real estate investing is research, learning as much as possible about any property that's available.

And you'll find plenty of companies that, for various kinds of fees, will help you with that research and with the auction process as a whole.