Primary loan on an auction?

Question

Hey BP community!

First I would like to say thanks to everyone who dedicates the time to help people out. I enjoy the community feel and do hope I get to contribute as I learn more.

You're right, get to the point! So has anyone had any luck or is it even possible to use a FHA or VA loan to purchas a house set up for auction? In your experience do you think banks have an issue trying to give out those type of loans?

Daniel Lehman · Answer

In terms of RESIDENTIAL loans, it is really not super feasible...  Too much due diligence required, so FHA and VA would probably be out.  Typically at auctions you need the cash there for the most part to get it done...  I have seen people go in with partners, buy the property cash, and then REFINANCE it with VA or FHA or Conventional loans and recoup the cash, but that would obviously require resources up front...

Daniel

Naveen Desai · Answer

Hi @Prasad J.

With the right contact in local banks, if you go with 25% or more down, you can get commercial loans. One of the criteria for commercial loans is that you as investor will never occupy the property. So they may verify that you own your own house, or live in different state from where you are buying. Again the model worked for me between 2010/2013, when the auction properties had the potential to be flipped. Maybe because not many people knew about online auctions and the RE markets were supportive of the model at the time.  I have not done that lately as the buyers are bidding really high- wonder where they are able to make any profits- if at all. And obviously, at today's auction prices that they are grabbing properties, if you add hard money loans, the model would not work at all.

Nevertheless, there are still certain tricks ( a luck), that can make it work :).  Feel free to discuss for specific details (tricks) !

Thanks,

Naveen.

Naveen Desai · Answer

Hi @Alex Day,

Just wanted to add my experience. Although, I have never used FHA and ( not eligible for  VA), I have used commercial loans on 3 auction properties (flipped).  Many a times auction properties cannot be inspected and that becomes a bottleneck for FHA loans.

Thanks.

Naveen.

Wayne Brooks · Answer

@Alex Day You probably need to clarify, I assumed you were talking about REO auctions, which you could use traditional financing for as long the property is in good enough condition......others here assumed you were talking about the actual foreclosure auctions (the legal process for the bank) in which you wouldn't be able to.

Alex D. · Answer

Hello all!

This is long overdue and I do apologize but I did want to thank everyone for chiming in and allowing me a bit of your time! I honestly figured it would come down to the appraisal however I figured along the way I'd learn something that I could do to maybe work around that or try a different type of loan. I may look into a commercial loan but I do need to do a bit more research to find an area where I think i could have some success. The area i'm currently in, I'm not too confident about considering it's a bit more of a run down area so I may look towards virginia a little more.

Primary loan on an auction?

Most Popular Reply