National Public Radio did a feature on foreclosure auctions, following one real estate investor as he sought a bargain at an auction in Boston. The auction held a surprise for the investor, the reporter, and me. After the young man who was being followed by the NPR correspondent won a lively bidding battle for a $300,000 house at the bargain price of $84,000, the bank refused to sell it to him. The reason: the auction was a “reserve” auction rather than an “absolute” auction, meaning that there was an unpublished price at which the bank would sell the property, but winning bids below that amount could be rejected. The investor was angry. The NPR reporter was confused.

The auction was rigged. Continue reading →