Only cash only can buy at auction - Is this true ?

11 posts by 8 users

Gaurav S.

Homeowner from los angeles, California

Feb 28 '11, 01:39 PM

First time home buyer. Trying to get good deal. Was thinking of buying home at auction(with help of some agent).Talked to an agent and he said he helps people bid on short sales.

He said the banks are not willing to sell house to people who need financing since lots of cash buyers available. Is that true ? If I pay the deposit at the auction and arrange for financing within 30 days.....even then will the bank prefer to sell it to the cash bidder ?

Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Feb 28 '11, 01:40 PM

Do you mean a public auction (e.g., Williams and Williams) or a sheriff's sale for a foreclosure?

Banks always prefer cash buyers.

Jon Holdman, Flying Phoenix LLC

Gaurav S.

Homeowner from los angeles, California

Feb 28 '11, 01:42 PM

Sorry if I wasn't clear. He said banks will give the auction to the next best cash bidder instead of me. So he recommended bidding on multiple homes in short sales process and then whichever works out buy that.That way I can also see the homes from inside.

Do you think he is giving a honest advice ?

Gaurav S.

Homeowner from los angeles, California

Feb 28 '11, 02:06 PM

I meant Sheriff sale.

Jon Holdman Moderator

SFR Investor from Wheat Ridge, Colorado

Feb 28 '11, 10:31 PM

Not sure how sheriff sales work in CA. Here in Colorado, you have to pay cash on the spot. If you're getting financing, then lender has to be there with you with cash in hand. No conventional lender will do this, but I know at least one hard money lender who will.

You're better off, in your position, making offers on REOs. Properties the bank already took back at the sheriff's auction. Look at a LOT, dozens, even 100. Make a lot of offers. Eventually you will buy one. Last one I bought, I would look at about 10-12 houses each weekend and make 3-4 offers. Eventually I had two accepted, one a REO and one a short. But the lender never approved the short. I bought the REO.

Jon Holdman, Flying Phoenix LLC

Dee Xixi

Real Estate Investor from waltham, Massachusetts

Feb 28 '11, 10:37 PM

I totally agreed with Jon. i tried to buy at auction few times with no luck but the least I can tell you it is not for a first time home buyer, unless you know the property inside out and you do your homework. I do know what type of financing you are getting but fro an fha it is about 45 days to close and the auction give you 30 days. Also you can have any contingencies, you have to make sure that you are getting a GREAT deal, if not you are on your own and so does your Earnest Money.

Steve Babiak

Real Estate Investor from Audubon, Pennsylvania

Mar 01 '11, 12:16 AM

Originally posted by Dee Xixi:
... the auction give you 30 days. ...

How much time you have to pay is truly dependent on the type of auction, and the rules they follow. Some require payment in full on the spot, and some only require a specific deposit on the spot followed by some time period in which to make the balance of the payment. So to say something like you have 30 days isn't quite accurate. For example, in one county where I buy at sheriff sale, they allow 10 calendar days to pay the balance; in another county where I buy at sheriff sale in the same state, they allow 21 days to pay the balance.

I seriously doubt you can get a conventional mortgage for a purchase at sheriff sale or trustee sale; a conventional mortgage requires things like appraisals and home inspections that in turn require GUARANTEED ACCESS to the interior of the property in question - you don't get that with sheriff sale or trustee sale auctions.

I did see a title company in my state (PA) that said they have done a sheriff sale purchase with a mortgage - but I still think the logistics make this a tough thing to pull off.

Joel Owens Verified Moderator

Commercial Real Estate Broker from Canton, Georgia

Mar 01 '11, 12:35 AM

I am not in California but just came back from a conference and a few of my friends work those areas.

I do believe the broker/agent is giving sound advice.

From what I have been told in California it varies by area but there are many more short sales than REO.The foreclosure process there takes a very,very long time and can be expensive for the banks.

Some areas in California are receiving multiple offers over asking.The reason is California generally isn't a cash flow market so people wrong or right buy on speculation.

It's one of those markets that cycles up hard and crashes down hard so timing is more critical than other markets with more subtle swings in value.

With the short sales you will have to watch out for time lines for approval of the sales price.If it has been a while and the prices have fallen even more you will have appraisal issues.

This is why you need to know absorption rates for the specific area you are buying in and buy what percent the market is increasing,decreasing each month or is it staying flat.

Velocity is also a factor.If for instance December values declined 3.0,then January 3.2,then February 3.6 percent then the velocity downwards is increasing.

Also values might decrease but interest rates rise causing you to buy less of a house.

So really get educated and drill down the numbers to make an informed decision.Also make sure to compare with market declines apples to apples.

So if you want a 3/2 ranch on a 1/2 acre make sure you are looking at that data and not a mixture of sales with wide adjustments to bring in line.

no legal advice

Foreclosure auctions are generally cash only at the courthouse.Property that has already been foreclosed on that the bank is sticking in a auction is a different animal.

Medium allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: 678-779-2798 [email protected]

Michael Lauther

Residential Landlord from Park Land , Florida

Mar 01 '11, 12:48 AM

In a short sale in NY, you are buying the property from the owner and the bank agrees to take less than they are owed. In a sale on the courthouse steps you are buying the property from the bank who has foreclosed. Banks will often consider an offer for a short sale with documentation of a down payment and a letter from a lender indicating they are willing to lend based on the credit of the buyer but will need documentation and of course subject to title search, appraisal, etc. I am not sure about what they would require on foreclosure or for a bank owned property.

This post has been removed.

Mike Grayford

Real Estate Investor from Simi Valley, California

Mar 01 '11, 03:23 AM
1 vote

Guarav, if you are looking for a house to live in, you should be able to get a deal however you buy, because you will likely be willing to pay more than an investor.

Here in California, there is no "sheriff's sale". It is called a Trustee Sale and the auction is handled at the courthouse. But yes, for these auctions, you must pay all cash and you should really know what you are doing, because you can get quite screwed.

There are also other types of auctions that you can look into. One kind is a post-foreclosure auction, such as can be found on These are bank-owned properties, which means they have gone through the Trustee Sale already and now the bank owns them. They will be much safer for you to purchase at because liens will be removed, and you may be able to do an inspection on the home (I think). Also, many of the homes sold at these types of auctions can be purchased with financing - you don't need all cash. And you still may be able to find a good deal there.

You can also look into probate auctions. In these, the owner of the house died and the home is being sold. Typically, you have to go to the actual house on the day of the auction and bid there.

You can try the short sale route. It usually takes a really long time. Very few short sales go through in Southern California, though maybe with recent new laws that will change.

Another thing to look into is buying an REO. These are the same houses you would get at the post-foreclosure auction, except they're not up for auction - you just make an offer for one that is on the mls. You can do an inspection on these homes, but the bank will usually not do any repairs, so you are buying the home as-is. As an owner-occupant, you should be able to get a good deal on an REO property.

Good luck!

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