Buying & Selling Houses

Don’t Skip This Step When Buying Foreclosures at Auction

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2 Articles Written
aerial shot of neighborhood with two-story houses close together

At a recent auction in El Paso, Texas, I noticed many bidders pulling property information from the internet as trustees called out addresses. Many of them used Google Street View to look at homes as they were auctioned off.

More likely than not, this was the first time these eager investors saw the properties—and they were bidding regardless!

Warning: Objects on Google Are Different Than They Appear

I understand why someone might opt to do this. After all, loading street images from Google Maps or Google Earth takes less than a minute. Driving out for an in-person inspection takes significantly longer, especially for those buying properties outside of their home county.

But I also know that these time-saving shortcuts can be costly.

Related: How to Buy a Foreclosure: A Guide for Finding & Landing Foreclosed Deals

While glancing over the shoulder of one bidder that day, I recognized the home he was viewing via Google Maps; it was a property my team had driven by every month for nearly a year. As you may know, the foreclosure process can be delayed for any number of reasons. This particular home's auction had been delayed month after month. Still, we stuck to our process and continued to include it in our rotation of drive-by inspections.

Most months, this home looked more or less the same. During our most recent inspection, however, the home didn’t look like much at all: It had been demolished.

Here that home is, with an image captured from Google Street View next to a more recent photo taken by a member of our team:

810 Baxter St, Seguin, TX 78155

If you—like many of the bidders at that auction in El Paso—rely on old, easily accessible online information as your sole source of property data, you’re taking a big risk when you bid. While the above example is a bit extreme, it illustrates why buying properties sight unseen at auction is a bad practice.

Dig Deeper Than the Competition

Drive-by inspections aren’t just for mitigating risk; they’re also an essential tool for gaining an edge over the competition at auction.

Unlike the bidders described in the section above, experienced investors typically do their due diligence and price their bids at auction accordingly. However, if you're willing to dig a bit deeper than most, you'll find opportunities that others may miss.

I found one such opportunity a few years back in North Sacramento.

The property was in a high-end area and would be an easy flip if we could get it for the right price. Since the home wasn’t far from where I lived at the time, I decided to do the drive-by inspection myself.

Related: How to Successfully Market to Homes in Pre-Foreclosure

man driving luxury sedan looking out passenger window

When I got there, I found that the home looked just as good as the others on the block—at least on the outside. Instead of simply snapping a few photos and driving away, I decided to investigate further. After knocking and waiting for a few moments with no answer, I walked over to a window and peeked inside.

At first glance, everything looked great—though one section of the house seemed unusually dark. Upon closer inspection, I realized why: There had been a fire.

Instead of writing the property off then and there, I looked a little closer and came to the conclusion that the damage wasn’t really that bad.

Come auction day, other investors were obviously aware of the fire damage; almost no one wanted to bid. These investors had done some homework, but I doubt that they looked closely enough to really gauge the extent of the damage. Since I had seen the fire damage with my own eyes, I was confident that we could complete the required repairs and still secure a tidy profit—if we could buy it for the right price.

Related: How to Avoid Competition & Find Deals by Purchasing Before or After Sheriff Sales

With very little competition, we bought the property for a great price that day. And as I suspected, thanks to a little extra due diligence, all it took to get the property ready for resale was a little help from a fire restoration company and a fresh coat of paint—minor expenses when it comes to fix and flips.

The deal was so profitable that we decided to buy another foreclosure with known fire damage shortly after.

Before bidding on a foreclosure at auction (or writing one off), do your due diligence and find the time for a drive-by inspection. This simple step can save you from making a costly mistake. Plus, it will give you the extra edge you need to secure low-cost properties with plenty of profit potential.

In Bidding to Buy, an upcoming book I co-authored with David Osborn, we outline our entire drive-by process and all of the other steps we take to research and buy foreclosures at auction. It’s coming soon to the BiggerPockets Bookstore.

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Have you purchased property at an auction? How did it go?

Join the discussion in the comment section.

Aaron Amuchastegui has been a full-time real estate investor for over 10 years. In that time, he’s purchased over 1,500 homes at auction and has bought and sold three apartment complexes. He curren...
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    Yasir Einaudi Realtor from El Paso, TX
    Replied 24 days ago
    Great article Aaron, When I started in REI, I went to the same auction in El Paso, Texas and noticed exactly the same thing. Besides the whole adrenaline and competition mindset, Bidders were raising prices based on pure emotions. Not checking liens before bidding is also a massive mistake. I can't even imagine how it is right now, Due to the record low in inventory, people get desperate and bid with their emotions instead. Thanks, Yas RE Agent and Investor from El Paso, Texas
    Aaron Amuchastegui Investor from Austin, TX
    Replied 15 days ago
    Exactly!! There are so many steps people forget about. Drives, title, liens, and definitely get caught up in emotions.
    John Dallas from Milwaukee Wisconsin
    Replied 24 days ago
    @yasir einaudi how do you find out if the property has a lien on it
    Aaron Amuchastegui Investor from Austin, TX
    Replied 15 days ago
    You can search the name and property at the local recorders office and look for anthing recorded against the documents. Not a quick process, but fairly easy to see the baggage when reading the docs
    Ricardo A Perez from Hollywood Florida
    Replied 24 days ago
    Great article !
    Tim Murphy
    Replied 23 days ago
    Great article!!
    Andrew Sanderson
    Replied 22 days ago
    Care should be taken when doing this, excessive looking around houses can be suspicious to neighbors. Going on the property can also be trespassing.
    Aaron Amuchastegui Investor from Austin, TX
    Replied 15 days ago
    There is definitely a fine line. I tell people you want to be sure you will be comfortable telling a police officer what you are doing if he pulls up.. If gutted, abandon, front door open, less risk than a house that might have someone still living there..
    Michael Mortensen Investor from Sheffield Lake, ohio
    Replied 21 days ago
    I have bought several properties successfully from Sheriff auction, however this past winter I did my typically due diligence (drive by, lien checks etc) but I didn't get out of the car like I normal would to walk around the property. After I bought the property I went to look further at what I had purchased and it was missing the rear basement wall! I hate cold weather but that's the last time I don't get out of the car and look around the property.
    Aaron Amuchastegui Investor from Austin, TX
    Replied 15 days ago
    Yes!! We learn the most when we skip a step and get "Caught"
    Avril Ann
    Replied 20 days ago
    A few years ago I bought two properties at auction, sight unseen. I was very lucky - they turned it to be ok. But I'll never do it again because even though the properties were good, the neighborhoods were not.
    Aaron Amuchastegui Investor from Austin, TX
    Replied 15 days ago
    Great point! Scoping out the neighborhood is just as important as the property itself
    Wilson Pun
    Replied 17 days ago
    Hi Aaron, thanks for the great tips. The drive-by examples, especially scoping out the fire damage in advance is a solid point.