I'm looking at purchasing an REO going to action on Homesearch.com. It's a 4/4 duplex that will need some moderate rehab work done (about $37k), but it's on a pretty decent block. I'm confident in my ARV calculations, so I know what my MAO (including the 5% buyer's fee the auction site charges) will be however I'm unfamiliar with the auction process, and could use some guidance.
The property will only come with a Special Warranty Deed. I'm working on getting my financing in order (FHA 203k), and was wondering if that will cause any major hang ups. Because there is no financing contingency, I need to make sure all my bases are 100% covered before I bid.
Just from doing a basic search on the property appraiser's website, I see there are nuisance leans on the house. Should I go ahead and pay for a full title search before the auction?
Finally, what should I expect from the bidding process? The house is listed on the MLS for $99k. Is what it's listed for typically the reserve price?
Any advice would be appreciated.
Most of those auction homes will come with a special warranty deed. The bank will usually provide standard title insurance though. If for some reason the bank is unable to provide a clean title then you're off the hook.
The list price on the MLS is usually meaningless- the bank sets a reserve price that is not made public and the bank may be bidding against you and you won't know. Know what you can pay including all their fees and stick to your max.
I don't know much about the auction process but can tell you that when utlizing a 203k loan, FHA will make you fix any items that aren't up to code so make sure you include those items in your rehab budget.
The MLS price is usually a low ball teaser price, having no relation to the reserve, which is undisclosed, as @Lisa Kohl mentioned.
Thanks for the info guys! I'll update next week when the auction closes.
I dont understand why they dont list the reserve price - is there a logical reason for this?
@Michelle Stanish , no logical reason. It's an attempt to drive the bids higher. In all honestly, if they did make the reserves public no one would bid because they would be too high at first.
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