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Buyer Beware When Dealing with Foreclosed Home Auction Shills

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Published: Thursday, April 23, 2009

It is the kind of thing you see in the movies - a bidder is actively pursuing a house at a foreclosed home auction when all of a sudden, another bidder starts running up the price of the home. It could be that this person is also interested in the property, and in that case, may the best bidder win. However it could also mean that you are caught in a trap common among some lenders - placing a phony bidder in the audience to drive prices upward and maximize the return for the bank. Illegal in some states, tolerated in others, the use of these phony bidders, or shills, is unethical at best and can affect whether you are successful at auction.


How to Spot a Shill

While there are no hard and fast rules for picking a phony bidder out of the crowd, there are a few tell tale signs that smart bidders should keep in mind. Keep your eyes open for these types of bidders:


  • Never bids first - a shill will only bid on a property after someone else has started the bidding. Their job is to drive bids higher, not start the bidding.
  • Increases the bids by large amounts - no one want to spend more than they have to on foreclosures at auction so pay attention to bidders to increase their bids by more than the stated minimum. They could be trying to bait another bidder into going higher.
  • Bids on multiple houses - a shill will bid on any house the lender has in their portfolio, if necessary to bring in the desired sale price. While many reputable investors bid on multiple properties, if a person jumps into multiple bids after others have started, and then continually raises the prices in a win at all costs pace, they could be working for the banks.
  • Never wins a bid - a person who bids repeatedly, driving a price higher than breaks off at the end on a consistent basis, could be a phony bidder. Pay attention to the amounts the bidder pulls out at. Are they different? If the bidder only has a spending limit they should pull out of the bid at the same price every time. But if they pull out at different prices each time, it could mean they have a breakeven point from the bank that is different for each home.

Buying your next home at a foreclosures real estate auction can net you the perfect house at the right price. But buyers should know they are all playing by the same rules and when banks resort to using phony buyers, it makes it difficult for honest bidders to be successful at auction. The good news is there are plenty of deals available on Southern California foreclosures, including Riverside County bank homes, Orange County foreclosures, San Diego bank homes and San Bernardino County bank owned homes. Whether you buy them at auction or through a standard real estate transaction, remember to do your homework first, inspect the property, and have your financing lined up. Happy bidding!

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About this Page: The use of a phony bidder, or shill, is becoming increasingly common in the home auction industry. The professionals at homeauctionexpo.com explain why shills are turning up and how to spot one.