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Posted almost 9 years ago

My experiences buying Florida property via online foreclosure auctions

Many investors have thought about trying their hand at real estate auctions as we all hear about the great bargains available there. There is certainly some truth to that, although there is certainly nothing easy about getting a great deal in an auction. I think the best way to describe it is to write about my own experiences securing foreclosure properties through the Pinellas County auctions in Tampa Florida.

Pinellas County auctions are online and anybody can create an account, place a deposit and bid for any of the 170-200 properties that are auctioned every single week.

Last year, I spent a lot of time figuring out how this system worked. Aside from just watching how the auctions worked in real time, I read a handful of online books on the Florida foreclosure process and bought coffees and lunches for a couple of local experts. 


pinellas-foreclosure

Every Monday morning I would scroll through a list of 170+ properties due for auction the following week. I would select a shortlist of 40 that matched our zipcode and price criteria. As the information contained in the Pinellas auction records is quite limited, I would then use websites like Zillow to filter the specific property types, square footages and building ages that my partners and I were interested in securing.

That usually left a list of 10 properties every week. We would then drive by each of them and do further research on what the market value might be. We had no access to the insides of any of these properties so we had no idea what the floors, walls, kitchens and bathrooms were like or the condition of the plumbing, heating and electrical systems. That meant we needed very conservative renovation estimates. Once we plugged these numbers into our carefully constructed templates we had usually whittled that list of 10 properties down to 3 or 4 properties.

The next step was to search the owner names on the public records for liens. That includes anything from a second mortgage, to tax liens, utility liens, code violations and even alimony liens. For example we might find a lien for $15,000 attached to the property and so we would adjust our bid price by $15,000 as this would have to be settled.

auction

On the morning of the auction, we would login to the Pinellas County foreclosure site and review our shortlisted properties. Usually half of them would have been withdrawn the previous evening due to a court order filed either by the person being foreclosed on or the Plaintiff (the bank). Plaintiffs always have a maximum bid that they are prepared to pay but you have no way of knowing in advance what it is. You just have to hope that your maximum bid price is higher than theirs.

To the frustration of wholesalers everywhere, the majority of properties at auction are either purchased back by the Plaintiffs/Banks or cancelled at the last minute. To give one example: on Monday 20th April, there were 72 properties publicly listed for auction in Pinellas County. By the close of business, 37 of them were bought back by the Plaintiff (i.e. they outbid everybody else, often at prices that made no sense), 19 were “Cancelled by County or Order” and 16 were successfully purchased by third party bidders.

Think about that: just 16 of those 72 properties were actually available to purchase at a price that was low enough to interest a third party and high enough to satisfy the banks. Some of the prices third party bidders paid made no sense either: I remember properties I valued at $120,000 being bought for $170,000. Bear in mind that the winning bidder would have had no idea what condition the property was in, they had no inspection period and they had an obligation to pay the full purchase price, in cash, within 24 hours of their bid being accepted. A suspiciously high winning bid is often a sign that an amateur investor bought it without doing a title check.

Conclusion
As you have probably gathered, this method of purchasing property isn´t for the faint hearted or rookies. I would estimate that judicial sale investors in Pinellas County only win 5% of all the bids they make if they are lucky - that’s a lot of rabbit holes.

There are many other private auction platforms out there as well: Hubzu.com, Auction.com and Homesearch.com are three others were we have successfully purchased properties in the past year. Unlike the judicial auctions, many of these were REOs with a listing broker, so we were able to get inside the property ahead of the auction with a general contractor and make much more accurate estimates of the renovations needed.

It´s just as hard to get a cracking deal though, you need to be very sure where you are going to add value and pay attention to the small print in their terms and conditions before placing deposits and bids.



Comments (7)

  1. What happens with the liens? Is that something the purchaser or higher bidder has to deal with after the Auction? Or the bidder gets a clean title? And what happens with the first and the second mortgage (if any)?


  2. Hi,

    What is the rule governing past due condo fees on a foreclosure in Largo, Fl?

    Is the buyer stuck with paying the association 3 to 5 years of back dues? or is there a cap?

    Thanks,

    Hank


  3. Hey! Just came across your article while researching auction properties in FL. Great read and very insightful for an out-of-state newbie. 

    You mentioned that with online sites it was possible to get interior access. But what did you do about properties that were outside your immediate driving radius say? Would you look up a local realtor/contractor? Or did you focus on properties within immediate reach?


  4. This is the type of info I was looking for.  REO prices in the central Florida area have skyrocketed to the point where they are almost retail priced properties; so, I'm looking for new ways to break into the market without having to go too much outside of my area.  Auctions are tempting but still very much considered the "unknown" in my mind!  Will be following you to hopefully pick up more tidbits on your success in the auction space. Do you ever venture into Orange or Seminole County? Thanks!


  5. Good info for me about to start on this journey. Hopefully, I find good people in the area to network with. Thanks!


  6. Thank you very much Babugouda, glad you liked it!  


  7. Great article!! short but quick walk through of the auction buy process!! I loved it.