Complaint Review: Hubzu.com - Internet

I am a house flipper in Central Florida.  I have been looking at Hubzu properties in my area.  I bought one in June of 2014.  Prior to closing, telephone communication with Hubzu personnel gave me the impression that their service office was in India.  Everyone had an Indian accent. 

The first thing that happened was Hubzu tried to ignore the closing date that was in the contract and force me to close earlier.  I am a cash buyer.  I refused and we proceeded for a close on the contract date.  Having bought over 50 properties in the past, closing was always done by a closing agent that was present at closing.  Papers were explained before I signed and I was always given a copy of a HUD-1, copies of all papers that I have signed and a copy of a signed and notarized deed transferring the property to me.  This is usually done before I delivered the funds at the closing table. 

Hubzu did not send a closing agent when I closed on the property in June of 2014.  They e-mailed a few forms including the HUD-1 to my Realtor and those forms did not include a copy of the signed and notarized deed. Closing boiled down to my signing the forms and e-mailing or faxing them back along with a wire transfer of the funds required.  I refused to close until provided a copy of the signed and notarized deed.  They provided it and we closed. To this day, June 11, 2015, I have not been provided a recorded copy of the deed.   I sold the subject property after rehabbing it in April 2015 without a problem so the deed was recorded.  Buyers are supposed to be sent the original, recorded deed once it has been recorded.  Hubzu obviously ignored the requirement as well as the need for a closing agent being present at closing.

Fast forward, I am now looking for another property to flip.  A Hubzu property came up last week that I was interested in.  I watched the property when the bidding period started.  Someone place a bid a $1,000 over the opening bid several days before the end of the bidding period.  There was no bidding on the property until the day before the last day of the bidding period.  Hubzu auctions always involve a "reserve" amount.  The reserve amount must be met in order for the house to be sold to the highest bidder.  A minimum bid is $1,000, so unlike other auctions you can't bid in increments below $1,000.  On the last day of the bidding period serious bidding began a couple of hours before the close of bidding.  The Hubzu rule is that if a bid is made within the last 15 minutes of bidding, the bid time will be extended to an additional 15 minute overtime period.  Once that overtime period ends, bidding ends.  

Bidding was at $125,000 at the beginning of the last 15 minutes.  I started at this time to bid.  I placed a bid at $127,000 and was immediately out bid by the previous high bidders "auto" bid.  You can enter a single bid or an auto bid.  If you enter an auto bid you set a limit on how high your auto bid can go.   If your bid is beat, your auto bid kicks in and increases your bid $1,000 above the bid that beat you.  This auto bidding continues until it reaches the auto bid maximum bid you allow.  When my $127,000 bid was beat by an auto bid, I placed another bid at $130,000.  That bid was beat by the same person's auto bid.  I bid $132,000 and that bid was beat by the auto bidder.  I then went all out and placed my planned highest bid at $135,000.  Hubzu immediately notified me that I had equaled the other high bidder's $135,000 auto bid but since he was an auto bidder his bid would prevail in a tie.  Because our bids were made in the last 15 minutes, the last 15 minute overtime period began.  I did some quick math and decided I could go as high as $136,000.  I placed that bid and my competition dropped out with 10 minutes to spare in the overtime period.  We were both notified when the bid hit $135,000 that the "reserve had been met."

I watched as the last ten minutes of the overtime period ticked to a close and no on placed another bid.  My $136,00 bid generated an automatic e-mail telling me that I was the highest bidder.  What would your conclusion be, you are the highest bidder, your bid has surpassed the reserve requirement and the bidding period has closed.  You would conclude as I did that you had just bought the property.  I was happy and called my Realtor to share the good news.  While talking to her, 20 minutes after the close of bidding, we both received an e-mail from Hubzu telling me that someone had placed a bid higher than mine!   The e-mail provided two links.  One indicated that I could see the bidding history.  I clicked on the link and it did not take me to a bidding history.  The second link indicated I could click on it and place a "backup bid."  How can I place a backup bid when I don't know the amount of the winning bid?

I was to say in the least, angry.  Scenarios that my Realtor and I discussed: My Realtor suggested that the bank that owned the REO property may have decided giving the level of the bidding that they could get more for the property and had decided to lie to me that I had been outbid to get rid of me.  My response to that was Hubzu was a national auction site, what are the chances that a bank would be contact at 10PM at night to discuss my winning bid that met their preset reserve amount?  My theory, which I am convinced is true is that Hubzu decided to ignore my winning bid that met the banks reserve because they sensed that they could get more for the property and thus a higher commission so they lied to me about being outbid to get rid of me.  When you buy a Hubzu property you pay a 4.5% bidder's premium and a $299 tech fee.  My guess was right, I few days later Hubzu put the same property back on the market with a higher opening bid amount.  When they put a property up for auction, aside from putting it on their site with a low opening bid amount that is low enough to attract buyers, they also list the property on the MLS.  The MLS listing is always many thousands of dollars above the auction opening bid amount and at or very near to market value. 

I’m now tracking that property again as well as several others, one in particular.  If you go onto the Hubzu site and click on a specific property you will see if anyone has bid and the amount of the bid.  They identify bidders by the first and last letter of their bidder name.  I have noticed that opening bids are frequently placed by a bidder identified as "w.....o"   My guess is that "w....o" is someone at Hubzu trying to "prime" the well.   Usually "w.....o" drops out after the bidding gets started.  The property that I am now interested in has a "w......o" opening bid that is $1,000 over the opening bid.  That bid did not change until yesterday and today. The last auction day is tomorrow.  A serious bidder has been bidding against "w......o".    "w.....o" has been beating every bid placed by the serious bidder using an "auto bid" to drive the price higher at $1,000 increments.  Bidding has gone from $83,000 to $93,000 very fast.   My suspicion is that Hubzu is trying to drive the price very close to the reserve so that when serious bidding gets underway an hour before the close of bidding, the reserve will be met or exceeded luring inexperienced bidders into buying the property for more that its condition merits.  The higher price means a higher 4.5% commission for Hubzu. 

Check what others filing Hubzu complaint reports on Ripoff Report have to say.  For example, Hubzu properties are almost always in need of extensive repairs.  I have not seen a single "cosmetic repair" property.  When Hubzu posts a property for auction, they do no give you enough time to arrange inspections.  Further complicating that is Hubzu properties do not have utilities turned on so plumbing, electrical, septic, etc. cannot be tested.  Hubzu also does not disclose any defects in the property and makes it clear that it is a buyer beware transaction.  If you back out before closing because you found serious problem or can't arrange financing on time if you are not a cash buyer you will pay a high cancellation fee.   Fortunately for me, I am a cash buyer and I have enough knowledge of construction, roofing, plumbing and electrical to evaluate a property.  I thoroughly inspect a property myself and with a member of my flip crew before making a bid.  Homebuyers or inexperienced flippers not having this knowledge are at high risk of being burned by undisclosed, very expensive problems.  If Hubzu argues they have no knowledge of defects they are lying.  The Bank has had the property inspected and appraised before offering it for sale.

Read all the Hubzu complaint posts.  One reports that Hubzu and its affiliated companies have gotten into trouble in almost every State and that State AG's have launched investigations. 

What can we do to expose Hubzu's unethical and unfair practices?   We can report what has happened to us to the local MLS service that takes Hubzu listings.   There is usually one obscure Realtor in a State that puts Hubzu properties on MLS.  We can also expose Hubzu's unethical and unfair practices to local Boards of Realtors encouraging them to not handle Hubzu properties and to press State legislators to initiate fair real estate auction practices legislation that puts an end Hubzu practices.  When you do this provide the MLS and Board of Realtors with copies of the complaints found on this and other websites.

 As a side note, I have run into a problem trying to buy REO property where the listing agent favors their own client making it difficult for others to place offers or get access to a property.   I have had an REO listing agent put a defective key in the lockbox to prevent agents from showing the property.  I have also had a listing agent make it difficult for my agent to obtain forms necessary to make an offer.   To further complicate REO offers, banks take offers and hold them for weeks and sometime months without response in order to attract more offers and drive up the resale price.  Legislation is needed to limit the amount of time a bank has to respond to an REO and also short sale offers.  Legislation should also prohibit realtors who list REO's from engaging in any conflict of interest involving the sale or purchase of an REO property.