My First Auction- Advice Needed!

11 Replies

Hi- I found out about a property that will be on my county’s courthouse steps in a couple weeks. I own another unit in this development. Lived in it for the first 5 years and have rented out for the last 5 years. Very familiar with the units and this development is increasing pretty rapidly in value.

I want to try and get this unit but I have never participated in this type of in person auction. I have the cash to purchase it and I am working on figuring out my max offer (using BP tools)even though I will not be able to view property prior to auction. Want to flip it bc doubt I could get it low enough to rehab and hold (BRRR). Nashville too hot for that many times.

Any advice on figuring out the max offer, the actual auction, or really anything dealing with this?? I have called the HOA to find out if delinquent there. Can get my title company to run title search (I’m an agent so have one that will do that for me). Anything else I am not thinking about as part of my due diligence? How do you estimate repairs on unseen properties? Any and all advice is appreciated! Thanks for your time.

Kelly

@Kelly Kormos   I would suggest contacting the current owner and offer to buy it from them.  The market is hot, I doubt they are upside down on the property.  You might get a good deal.  If not you might get into it to see it and figure out more about how much it is worth.

@Michael Biggs What do you do after you talk with the owner ? How do you stop the auction process ? Do you go through an attorney ?
Thanks for the advice :)

@Nina Ibrahimbegovic   I would close (including payoff of the mortgage) before the auction.  Of course, this would require a true cash purchase.

@Kelly Kormos , I reckon if you can't "get it low enough to rehab and hold (BRRR)", and you don't know "How do you estimate repairs on unseen properties" in order to Flip it, you could be asking for trouble.

ie. Flippers aren't in the habit of consistently offering more than BRRRR Investors anyway. (Why should they?)

ie. Only offer as much as your best educated/experienced guess would allow you to BRRRR. Good luck...

@michelbiggs yes it would be a true cash purchase but I had no clue you could purchase the home from the owner once it had already been set to go to auction...I am an agent and would need to make sure no legal ramifications for that. Have you done it?  Any advice on what to say?

@brentcoombs I have a good idea of really the max it could be since I own one and with that even if major surprises I wouldn’t lose money.  This is one I feel confident in but just wondering if others had strategies. Going to try and poke in windows and see if I can see anything haha.  Thanks!!

@Kelly Kormos

Kelly, I went to my local judicial auction for more than a year before I bought anything. Your state has different laws, but still, I would avoid buying anything right out the gate, however good the deal looks from the outside. I am not advocating investor paralysis, and no business forces you to make hard, fast, and expensive decisions like this one, but still, I'd wait until I had attended a few auctions and followed up on a few sales by other third-party investors before I started making moves.

@Kelly Kormos A few things you might find helpful...

1. this is usually the last in a series of financial problems affecting the owner. If you purchase prior to auction, you need to have a title search done and updated to ensure that you aren't purchasing a property with judgments, junior liens, unpaid dues, taxes, etc. Some of these items would be extinguished if the foreclosure goes through. None of them would be extinguished in a private sale.

2. assume the absolute worst as far as interior condition is concerned. 

3. be prepared to have to evict the owner if you are the foreclosure purchaser.

@Tom Gimer Thanks! So I have my title company running a search and reached out to my HOA contact for any past due there as well. and when you say updated, do you mean run it now and then again right before closing? I talked to a buddy of mine that has gone to the homeowner prior to auction and purchased directly from him. Looking at tax records his last refi was 4 years ago right at about my max purchase price (unless I am able to see the home before auction by contacting the owner and that changes). I want to try this because it would probably go for more than that at auction if bank needs to recoup that money plus make a profit??? Thanks for your help!!

Originally posted by @Kelly Kormos :

@michaelbiggs yes it would be a true cash purchase but I had no clue you could purchase the home from the owner once it had already been set to go to auction...I am an agent and would need to make sure no legal ramifications for that. Have you done it?  Any advice on what to say?

@brentcoombs I have a good idea of really the max it could be since I own one and with that even if major surprises I wouldn’t lose money.  This is one I feel confident in but just wondering if others had strategies. Going to try and poke in windows and see if I can see anything haha.  Thanks!!

Originally posted by @Kelly Kormos :

@Tom Gimer Thanks! So I have my title company running a search and reached out to my HOA contact for any past due there as well. and when you say updated, do you mean run it now and then again right before closing? I talked to a buddy of mine that has gone to the homeowner prior to auction and purchased directly from him. Looking at tax records his last refi was 4 years ago right at about my max purchase price (unless I am able to see the home before auction by contacting the owner and that changes). I want to try this because it would probably go for more than that at auction if bank needs to recoup that money plus make a profit??? Thanks for your help!!

Yes, if you are purchasing prior to foreclosure your title company would update their search prior to closing/recording.

If the last refi was 4 years ago, very little principal has been paid down and you can likely add 1+ years of overdue payments to the bank balance. Then add any other unpaids, judgments, liens. I think this unit probably needs to go to the auction block, but that's just me.

Banks don't try to make a profit. They just try to recoup what is owed. There is a point at which some will let a property sell for less than the balance.

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