My first Tax Auction(Wayne County MI)

13 Replies

Over the last several months I have been researching and preparing for the local Wayne County Tax auction. The Auction wrapped up yesterday and when it was all said and done we only purchased one property. Here is a quick rundown of my experiences.

Preparation started back in March-April with a list of the properties scheduled for foreclosure in the local legal news. I was also able to pull an excel spreadsheet from a local website that details property/parcel data. We spent a lot of time looking through these properties. Sorting them. Rating them. Driving by. I even ran a direct marketing campaign to some of our favorites on the list to see if I could maybe get them before the auction. If I could do it all over I would not start researching nearly as early as I did, because over the last several months many of the properties that we were interested in were pulled from the auction for one reason or another. We spent A LOT of time researching properties that we never even had a chance on bidding on. Lesson learned? The city/county government does not want to take back the homes and they give many opportunities to homeowners to redeem before their homes go to auction. Don't spend too much time worrying about which properties you want to bid on until the auction is fairly close. That being said, don't wait until the last moment either, as you need to research the properties and do drive-by's before bidding on the properties.

For financing we decided to pull some equity out of some of our rental properties that we own free and clear. It took a lot of calls to different banks to find one that would work with us for what we were trying to do. That being said, once we found the right bank it was fast, easy and we got good rates. I honestly probably spoke with more than 20 banks before finding the right fit. And I was actually referred to them by another bank that we had stopped in. I was close to using hard money, but I am glad I did not. My rates are very solid and the junk fees were very low. Lesson Learned? Start this property early and cast a wide net. Just because one bank says no, does not mean there is not a good fit out there.

When it came time to prep for the auction, we created excel spreadsheets of the areas we were interested in with all of the properties that fit what we were looking for. We drove the neighborhoods, rated the houses, checked values in the areas and made assumptions for rehab costs. We assigned a max bid to all properties and we determined which properties we were interested in bidding on. This turned out to be invaluable information. I think the only thing I would change is the organization of the information. Because Wayne County had so many properties that they were auctioning auction was split into lots of 140 properties that ended in 15 minute increments. Also, the lots had properties from similar areas gathered together. This meant that we had some auctions that had 10-15 houses we were interested in ending at the same time..... It was hectic. Lesson Learned? Gather information and keep it organized. When you looking at a list of 10 properties that you want to bid on and you only have a couple of minutes to make a decision it is important to be able to find notes.

As the auctions were ending we noticed that many of the houses were selling for way more than we were willing to pay. There were houses that sold for 175k that had (My guesstimated) ARVs of 185k. We had intended to pick up 2 rentals and a possible flip. Unfortunately most of the houses went higher than we can find on the MLS and with MLS listings we can inspect the property. Lesson Learned? know what the houses are worth and what your maximum bid is and stick to it. No deal is better than a bad deal and from what I saw there were a lot of (possible) bad deals going on.

When it was all said and done we ended up with one property. A $1000 Sq/ft ranch for 30k. We have not been able to inspect the inside the home yet, but it is in good condition externally. It is in an OK neighborhood in a pretty solid Detroit Suburb. It should rent for $950-$1050/mo and if we can be all in for less than 45k we will consider it a win. I will update once we have received the deed and we are able to inspect the inside of the property.

@Joshua Woolls  Thanks for sharing & congrats on sticking to your guns, and still getting a house.

Thanks @Joshua Woolls , not as simple a process as it might seem from the outside. Sounds like you might have landed a good deal.

I understand there is a further round of the auction in October, will you be participating over there as well?

Would be interested to hear which bank gave you the refinance. Can you share or PM me.? Thanks.

Originally posted by @Saul L. :

Thanks @Joshua Woolls, not as simple a process as it might seem from the outside. Sounds like you might have landed a good deal.

I understand there is a further round of the auction in October, will you be participating over there as well?

Would be interested to hear which bank gave you the refinance. Can you share or PM me.? Thanks.

 I doubt I will be participating in the next round. It is basically the properties that did not sell in the first round and they lower the minimum bid to $500. Most of these properties are in the city proper and I am not really interested in the city itself. I will probably keep an eye on the next round, but I may not even register.

As for the bank, I will PM you(and if anyone else is looking for a contact, shoot me a message).

Your process/experience is much like mine.  I didn't start researching until the list was available from the auction site and I used the sites watch list also but the spread sheet was valuable as I added sqft, beds, baths, my max bid, etc. I got a 4 unit in what I consider rentable area of detroit for $3400 plus $180 title search(I'll add cost of title searches that i didn't win and split amung ones I did).  there is a $500 lien on the property that I may have to pay but I'm happy with my first purchase.  3 of the units are 2 bedrooms and should rent for $500 each.  Time will tell if I can collect the rent and manage the property from out of state.

@Joshua Woolls Congrats on picking up a suburb Detroit play that went under actual retail this year. I applaud your efforts of getting out there and getting everything you can. But the shear amount of metro homes were not enough for the taking, this is a sign for me not to focus too much efforts on the tax auction for burb homes going forward. That ship has sailed.  I got that sick feeling when Taylor/Allen Park/redford/Lincoln park was taken off the auction. I knew it was not going to be pretty. Sorry I kept silent on it all.

I got in some of these homes and talked to all the neighbors and still was outbid by those with information I knew they didn't have. Investors were paying well over what anyone would ever pay. Good sign for the neighborhoods and for the MLS this upcoming spring.

Detroit city proper, is another story. Too many homes, too less of time. Alot slip in desired areas and fell through the cracks.. I was able picked up some steals. 

Originally posted by @Mike Carino :

@Joshua Woolls Congrats on picking up a suburb Detroit play that went under actual retail this year. I applaud your efforts of getting out there and getting everything you can. But the shear amount of metro homes were not enough for the taking, this is a sign for me not to focus too much efforts on the tax auction for burb homes going forward. That ship has sailed.  I got that sick feeling when Taylor/Allen Park/redford/Lincoln park was taken off the auction. I knew it was not going to be pretty. Sorry I kept silent on it all.

I got in some of these homes and talked to all the neighbors and still was outbid by those with information I knew they didn't have. Investors were paying well over what anyone would ever pay. Good sign for the neighborhoods and for the MLS this upcoming spring.

Detroit city proper, is another story. Too many homes, too less of time. Alot slip in desired areas and fell through the cracks.. I was able picked up some steals. 

 I think you hit the nail on the head with the suburban homes. There were a couple in Dearborn Heights and Westland that weren't bad deals, but they weren't great deals. I certainly feel that we can beat them on the MLS and certainly beat them by direct marketing. I knew that there would be some solid Detroit pick ups, but it really isn't my target area. I don't bid if I don't know. I'm not gambling. Maybe I need to pick a couple of the quieter Detroit neighborhoods and give it a shot next year.

I was talking to my wife and I will certainly not be spending as much time on the auction next year. On the plus side, I learned some cities that I did not know before and I will be open to some new areas in the future.

Originally posted by @Mike Carino :

@Joshua Woolls Congrats on picking up a suburb Detroit play that went under actual retail this year. I applaud your efforts of getting out there and getting everything you can. But the shear amount of metro homes were not enough for the taking, this is a sign for me not to focus too much efforts on the tax auction for burb homes going forward. That ship has sailed.  I got that sick feeling when Taylor/Allen Park/redford/Lincoln park was taken off the auction. I knew it was not going to be pretty. Sorry I kept silent on it all.

I got in some of these homes and talked to all the neighbors and still was outbid by those with information I knew they didn't have. Investors were paying well over what anyone would ever pay. Good sign for the neighborhoods and for the MLS this upcoming spring.

Detroit city proper, is another story. Too many homes, too less of time. Alot slip in desired areas and fell through the cracks.. I was able picked up some steals. 

 I was told that Redford struck a deal with a couple of investors and basically pulled all of their desirable properties before the auction and sold them directly for the outstanding taxes. 

Originally posted by @Joshua Woolls :
Originally posted by @Mike Carino:

@Joshua Woolls Congrats on picking up a suburb Detroit play that went under actual retail this year. I applaud your efforts of getting out there and getting everything you can. But the shear amount of metro homes were not enough for the taking, this is a sign for me not to focus too much efforts on the tax auction for burb homes going forward. That ship has sailed.  I got that sick feeling when Taylor/Allen Park/redford/Lincoln park was taken off the auction. I knew it was not going to be pretty. Sorry I kept silent on it all.

I got in some of these homes and talked to all the neighbors and still was outbid by those with information I knew they didn't have. Investors were paying well over what anyone would ever pay. Good sign for the neighborhoods and for the MLS this upcoming spring.

Detroit city proper, is another story. Too many homes, too less of time. Alot slip in desired areas and fell through the cracks.. I was able picked up some steals. 

 I was told that Redford struck a deal with a couple of investors and basically pulled all of their desirable properties before the auction and sold them directly for the outstanding taxes. 

 Same downriver. High dollar investors bought everything in previous auctions and hasn't paid taxes or have rehab the property for rent to thesee cities. So they went for a more trusted path. This alone drove burb auction home prices up as there just was not enough homes to choose from.

Congrats Joshua-

Happy to hear you picked up a property on your criteria, and learned some things along the way. I wonder just how saturated our market is becoming with real estate investors given the opportunities that it's historically been having. 

Best-

Erik 

This was my first auction too, and I also found most of the properties sold for prices that were maybe 5k less than MLS deals. With all the added risk I just don't see where the profit is in it. I did pick up a couple of properties in Redford Twp. Now I'm just waiting on deeds to see if I got a home run or two, or just a base hit.

Originally posted by @Mike Carino :
Originally posted by @Joshua Woolls:
Originally posted by @Mike Carino:

@Joshua Woolls Congrats on picking up a suburb Detroit play that went under actual retail this year. I applaud your efforts of getting out there and getting everything you can. But the shear amount of metro homes were not enough for the taking, this is a sign for me not to focus too much efforts on the tax auction for burb homes going forward. That ship has sailed.  I got that sick feeling when Taylor/Allen Park/redford/Lincoln park was taken off the auction. I knew it was not going to be pretty. Sorry I kept silent on it all.

I got in some of these homes and talked to all the neighbors and still was outbid by those with information I knew they didn't have. Investors were paying well over what anyone would ever pay. Good sign for the neighborhoods and for the MLS this upcoming spring.

Detroit city proper, is another story. Too many homes, too less of time. Alot slip in desired areas and fell through the cracks.. I was able picked up some steals. 

 I was told that Redford struck a deal with a couple of investors and basically pulled all of their desirable properties before the auction and sold them directly for the outstanding taxes. 

 Same downriver. High dollar investors bought everything in previous auctions and hasn't paid taxes or have rehab the property for rent to thesee cities. So they went for a more trusted path. This alone drove burb auction home prices up as there just was not enough homes to choose from.

Funny story though... I was direct marketing to homes in Redford(my target area) that were going to be in the auction and I received two calls from people that had there homes purchased from Redford. In both cases, the investor had reached out to the homeowner and offered to sell the homes back to them at market prices without doing anything to the homes. The whole point of giving these investors exclusive first dibs was that they were supposed to rehab them...

Originally posted by @Ben Parr :

This was my first auction too, and I also found most of the properties sold for prices that were maybe 5k less than MLS deals. With all the added risk I just don't see where the profit is in it. I did pick up a couple of properties in Redford Twp. Now I'm just waiting on deeds to see if I got a home run or two, or just a base hit.

I agree... To much to pay with the added risk. I know there are deals to be had where I can look at the properties and pretty much make it risk free.