why are auction property selling for market value?

Question

Hello,

I am looking for guidance. I have personally done 4 flips, one was a hold/rental that I eventually flipped and old, one was a house hack, and two I did out of market with HML(my first two were out of pocket) 1 I sold and 1 I held.

I have been trying buy at the Texas (Harris County, fort bend county) county auction and on some auction sites, in hopes I find a deal in the Houston area that I can flip or fix & hold. To my surprise, bidders are reaching market value and in some cases I even saw a bid go above market value. I have also placed cash offers on bank owned properties and have been denied or countered dollars under market value. at this point why not buy off MLS, closing with title, less risk.

any advice? I want to find deals I can rehab to hold or flip. I can't house hack, I'm a family of 5 with kids in school.

thank you!!

Nathan Gesner · Answer

Because the market is crazy, and prices have increased 50% or more in the past few years. Investors are desperate to find "deals" and buying at auction feels like a deal, even if it's not.

I've been to auctions where people pay market price for a home that is clearly a fixer-upper, meaning they will be under water after renovation, even if they don't consider the cost of their own labor. People do the same thing at estate auctions, farm auctions, etc.

Bill B. · Answer

Plus 90% of the buyers might not be investors. They could easily be owner occupants who need a place to live. Especially in a certain place or at a certain price with very limited inventory. Even if they are investors maybe they’re got super sweet super secret STR income plans or house hacking by the room plans that generates much more income than your plan. The lowest bids in every auction will be made my LTR landlords, they literally have to pay th least to make their deal pencil. Every auction attended by 2 or more real buyers sells at “market price”. It’s the market price for a quick sale in its current condition with a certain amount of advertising. What would you call every single “highest and best” offer situation on the MLS other than an auction? You can definitely offer the highest and best and pay under market.

Ps. I might ask why people are paying way over “market price” when they pay for first class on a plane, buy $100k pickup trucks or $500k boats. Or especially when they spend $100 at a restaurant. Turns out I’m not the market that sets the price.

David Avery · Answer

EGO'S.

I was going to say a word that starts D and rhythms with prick.

Men are very we weird that way!!@

Plus some skinny jeans will bid  hi just because he doesn't know what he is doing.

Jonathan Bock · Answer

@Edith Acevedo

Your struggle with logic will be eternal; we are humans get used to it.

Edith Acevedo · Answer

You’re right Daniel, the bigger the work the less competition. I’m comfortable taking on bigger rehabs. Like you said, I am going to continue to put in offers. I have to land something at one point.

Thank you!

Gustavo Munoz Castro · Answer

Some great suggestions here already. I would try to network with local wholesalers and investor-friendly agents, but at some point to really scale you'll need to market directly to potential sellers. My thoughts:

1) try driving for dollars in your target neighborhoods, find run down properties and send a piece of mail to the seller asking if they will consider an offer.

2) Mail, call and text. Leave VM's.

3) Try prospecting, get a list of high equity properties of older homes, market to them with mailers and call, ask them if they want cash fast and get rid of the home.

You'll nee to send a lot of outreach to find interested parties, and from them it will take several to find a qualified deal, That's how it works. Best of luck.

Sia Rawat · Answer

Hey Edith, I know that you have already gathered some pretty good advice here, but I just wanted to pitch in and share my agreeance with you. The majority of wholesalers are no good, and even with the MLS, it is difficult to come across a property with an appealing profit margin. It seems that the next best thing is to acquire directly from sellers. If you'd like, I'd be more than happy to discuss more in-depth. Thanks!

Gina Stern · Answer

HI Edith, you are correct, there is a lot of competition out there currently, especially in the Florida market, but there are always opportunities, even in a competitive market, just always make sure to do your due diligence! Good luck and direct message me if you need any more advice, always willing to help!

V.G Jason · Answer

I can speak in Houston's case a few of the bigger winners are foreign investors and to them they are just needing to put the cash somewhere. I don't attempt to compete with it. I laugh when they buy in 5th ward, and then sometimes try to flip it to me. It's like come on man, do you know what area you're selling one of the most murder capital intensive areas of america?

Same goes for all those deals on NW, networth, etc., in Houston-- they are just paying the asking price and it's underwater once fixed but there's no note. They pay all cash and for the most part care very, very little. They just want that money anywhere but in their bank account overseas.

It's slowing down though, most of their money the last 30 days has gone to gold, silver, and bitcoin. The same few int'l investors have had less of a presence in Houston these past 30 days then in last 10-15 months prior. I think they come back to this here though shortly.

The great wealth divide isn't just intra-murica. Its global, the big dogs overseas are going to cook you in your own kitchen. You may feel they are overpaying, but they're more equipped than you to them this is just like you buying a $300 ticket to the Texans. It's cool, little pricey but doesn't stop how I live my life and you already forgot about the price once you're there.  Doesn't change the fact they overpaid, but it does if they never have to sell. As we get closer and closer to rates pivoting, you're going to see these same people unbuckle from US debt into US hard assets even more, we've seen a glimpse of that thus far this year. And dump out of these top concentrated US stocks into some small-cap growth ones, they are just trying to time this. I am just very curious if there's ever a shoe that'll drop that no one suspects, it's how it usually works.

Henry Lazerow · Answer

Agree most the wholesalers deals even worse. I routinely see wholesale deals priced over what you can negotiate on mls. I have done 2 brrrs off MLS and working on a 3rd now. I think the other way to find deals is market yourself and this works better the worse/less hot your market.

why are auction property selling for market value?

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