BiggerPockets

Well, first off I just reached one of my 2010 goals - to purchase a foreclosure on the court house steps!

I've been going to all auctions with meat and watching the big boys bump knuckles. You know, the stuff in the burbs that retails around 150 - 350k. Not wanting to put that much skin in the game straight off, and also wanting to stick to my buy hold rent SFRs in a fast appreciating hot RE market, I purchased a 2100 sq ft SFH on a very large city lot (66 x 150). The house was vacant, so I poked around quite a bit, though I couldn't gain entry. The walls look good, from what I could tell (recently painted) and the windows are replacement vinyl, the roof looks good. Doing my due dil turned up this: buyer paid 55k in 95 (neighborhood was not what it is today - ie drugs & crime) - owner occupied, and put some money into it. Judgement was for 96k, but they opened at 84 and went to 86,6. Being a newb and all, I wasn't sure if I should bid as it was just me there, oh, and a younger lass who wants to buy the house, but doesn't have capital to play the game. by her look, I'm sure she would qualify for FHA / conventional though (yup, got her number for possible flip). So I can the attorney for the bank and say, "hey, I'm sitting here on the steps and there are no other bidders... I'm tempted to pass, can I make another offer after." I got some run around, but basically they said "yes, you can put it in writing and send it over, but it will take time, and there are no promises." Anyway, knowing the street, and the neighborhood, I didn't want some realtor putting a number in the banks head (higher than the 86k I'm sure) so I opted to take my certified funds and buy the sucker. Now, I know that because my friends the big boys were not there, that this isn't the best deal that can be had on a regular basis. They're looking for 50c on the dollar and less, holding for short times, and reselling for market rate. This was about 60-70c on the dollar, depending on who you ask. You ask me and I'll say that it may be that now, but in 5 years, I'm going to be really happy. So why all this post? Well basically, I think it really comes down to what you know, and your gut. My SFRs are all in this area so I can package them up nice when it is time to exit. I have 2 others on this street. This has a garage at the very back of the large lot, that has a dead end street the buts up to it, AND it has a gate to my lot!! Now I have a place to store stuff where I won't get in my Tenant's way! I've got ample space to build if I want. Plus I checked with the city prior, and I can legally convert this SFR into a duplex.
Anyway, living and learning, and loving BP - just wanted to let you all know I'm very excited to have hit a 2010 goal already! Can't wait to check a few more boxes off my list.
Comps in this area tell me that I could flip it for 120 without doing anything, and in about 1 week on the market.

Feel free to comment / advise etc.

Cheers!
Mark

Mark,

Where is the BP thread that makes you say "despite BP advice"? Please post link if you can.

I personally favor those where nobody else is bidding (those are cheaper!), but I am aware of somebody else posting here to not bid unless you see others bidding - HOGWASH! Just be certain of your own due diligence before opening your mouth to bid.

I think you need to buy lower at foreclosure auctions, but if the numbers work for you...

I anticipate at least 10 to 20% of value will be needed to repair a property bought at the foreclosure auction, so that is why I say to offer a bit less. And repairs can easily exceed the percentages I am giving here, especially when the property's borrowers have been in default for a long time.

Will - the thread I was refering to is this one, where you and I and others chimed in:
http://www.biggerpockets.com/forums/41/topics/43830-tutorial-for-buying-at-foreclosure-auctions

Seems like you ended up paying less than the numbers that were suggested as MAX in that other thread. The repairs part is always the uncertainty with these auction properties. As I said earlier, as long as the numbers work for you...

Now, go read the link that I posted above; in that page you'll find another post I made with a link to Rich Weese's suggestions for buying foreclosures at auction. Go do the things he says to do after - pictures of inside, get it insured , etc.

Steve, just finished the link you sent and now me elated feeling is quashed. I never checked out the position of the lien or anything. My attorney told me what to do, but I caught myself short on time and said F it. now I'm really saying F it!!! The paperwork is at his office, so hopefully he will tell me soon that I am cool and not SOL. :-/

Congrats Mark, you seem to know the area well and what your exit strategy will be.

Mark,

Any updates / progress to report on this one?

Ha ha sam, indeed... 11k lessons learned! I'll be sure to keep this thread updated. I'm confident based on experience that it is the first position. It doesn't make sense otherwise... Anyway, not sweating it yet... But DEF will not do such a newb thing again... I was literally running down main street to get to auction in time... Not that it is an excuse... Just being honest about the situation. Live and learn, glad I got u folk & pro team... Now I need to always cross my t's ;-)

I would advise you to be sure of the lien position BEFORE doing any work to the property.
I've seen a property someone bought at auction now facing foreclosure 9 months later by a first position blanket mortgage. If you look at the county records it does not appear as attached to the property but if you look at the other property owned by the same person it is very evident the blanket mortgage also encumbers the property he bought at auction.

Not really that scary to buy at auction if you have a title company involved and get a commitment. The title report will include such encumbrances as taxes but if you know they are there you can bid accordingly.

Disclaimer: I am not an attorney, so what I am saying here is not to be construed as legal advice - just my opinion - and legal counsel should be consulted.

Assuming this was in the state of PA, the fact that the IRS was named and served as additional defendants is a good thing for you. That was done with the intent of removing the IRS lien from the property, so that the IRS no longer encumbers the property; I also believe that this action also takes away the 120-day redemption rights that the IRS would otherwise have. The former owners still owe the IRS that money, but it now does not impact title for you.