Obtain Financing for Auctions

6 Replies

At a local property auction, I noticed many people were paying with Cashier's Checks. Were these individuals using their own cash to pay for the Cashier's Checks, or were they funded through loans for their Cashier's Checks? Something like that? I'm a novice, a bit uneducated on the process.

From what you say, I assume your acutions work like ours here in CO.  Cash on the barrelhead.  Many were probably using their own cash.  Folks with cash are truly king at auctions.

Its not impossible to use a lender, though. They are essentially going to have to accompany you and hand over the checks. Or, use another source of collateral (e.g., cash out refi against existing properties, HELOC, or borrowing from some other source.)

I also went to a tax sale where people were using cashier's checks and just filling in the amounts when they paid.  I just got pre-qualified for a portfolio loan and asked the loan officer if they did this.  She said, no, the amount would have to be filled in before I took the check out of the bank.

Maybe another bank would allow this, but I haven't had the chance to inquire.  There is really no chance that I would risk taking thousands in cash to a cash sale.  I think I'll call the county courthouse people next week to see what they say about it.

Originally posted by @Helen Kirk :

I also went to a tax sale where people were using cashier's checks and just filling in the amounts when they paid.  I just got pre-qualified for a portfolio loan and asked the loan officer if they did this.  She said, no, the amount would have to be filled in before I took the check out of the bank.

Maybe another bank would allow this, but I haven't had the chance to inquire.  There is really no chance that I would risk taking thousands in cash to a cash sale.  I think I'll call the county courthouse people next week to see what they say about it.

I doubt that it was a cashier's check that someone just "filled in the amount when they paid".  A cashier's check is generally treated as guaranteed funds because technically it's the bank's check and they are responsible for the payment.  A blank cashier's check would be like the bank giving someone a blank check that it (the bank) is then obligated to pay with whatever was later filled in. 

Hence the reason that cashier's checks are pre-filled before you leave the bank.  (The bank wants to know how much it's going to pay and it's likely going to take that money out of your account as soon as they issue it to you.)

In any event, how payments are handled at auctions can and do vary by state and even by county. Sometimes you can pay by actual cash, but usually by "cash" they mean certified funds (i.e. cashier's check). And yes, that often means that the bidder actually has that money immediately available to them and not via a loan (though in some instances a HELOC could be used).

You generally do not show up to the auction with a briefcase full of actual cash though.  (However, I guess it would look pretty cool to have a briefcase handcuffed to your wrist like they do in the movies.)

At the last auction I went to, the ONLY way you could pay was by cashier's check and you had to show that you had them in your possession before the auction started to even get a bidder's card.  And then, if you were the winning bidder, you had to pay immediately.  And I mean immediately - like even before the next property was auctioned off. 

What I did, and I'm guessing what most people there did, was just get multiple pre-filled cashier's checks in various denominations ($10k, $25k, $50k, etc) so that you can try to pay as close to the purchase price as possible since any overage you pay isn't going to be refunded to you for several weeks, and who wants to loan money out interest-free?  :)

@Kyle J. I think you've got the right idea.  I can see going in with various denominations of cashier's checks!  I don't know why I didn't think about that.  Probably because I didn't stick around to actually watch the properties being paid on by the buyers.  I'm still such a newbie!!!

@Helen Kirk - there is a simple way to get cashier check denominations to use.  Basically you use a split the difference on your pre-determined max bid. Say your max bid is 64K; then you would go with a 32K, a 16K, an 8K, a 4K, a 2K, a 1K and two for $500. Or another 1K instead of the two for $500.  That should cover you for any bid amount from your min denomination to max bid, in 1K increments.

Figure the max bid, and keep dividing by two until you reach the smallest denomination that makes sense. 

Thanks @Steve Babiak . That makes great sense.  Too bad my county only does these tax sales once a year. I'm hoping to go to some county "courthouse steps" auctions though. Do you know if the same thing would apply?  I have been pre-approved at a local bank and a credit union and have their pre-approval letters, but could get some cashier's checks for lower amounts if I need to.  

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