What are my loan options for auction properties?

Question

Hi all! I purchased a property from a tax auction in 2020 for 35k, did most of the renovation myself for 70k, and now have a house worth about 175k, rented for the last 7 months. to a good tenant. I want to do it again! With that first house, I paid cash for everything by selling other assets. How should I use the house to buy another property at tax auction for a rent & hold?

The problems:

1. In my state, tax foreclosure listings are announced 30 days before the auction.

2. Then after the sale, you have 30 days to close.

3. There's no guarantee that you'll win anything or that there will be good deals.

A lender I spoke to for a Cash out Refinance said that it could take 3+ months to close a loan, too long a timeline for an auction.

What do you suggest I do?

Scott Bremer · Answer

Thanks for your reply! The tax foreclosure auctions I've been attending usually feature abandoned homes that are not habitable. They're sold with quit claim deeds and you're *technically* not supposed to trespass but not to do so would be foolish. Inspections/appraisals aren't the norm.

Caroline Gerardo · Answer

A loan can close in 14 days. Will you have a conformed/signed contract? You front nonrefundable all the costs of appraisal/inspections; title company is going to struggle getting everything cleared fast as taxes/HOA dues/liens can pop up at closing those you front that money before you close to get title cleared. Depends on type of auction. County court ones organized. Delays happen and cancellation of sale depending on state. Sheriff ones have high percent of failures. Lenders generally don't get a salary to spend money, resources, and time on a Sheriff sale that has 5% chance of being able to fund and close. Condition of property has to meet health and safety code and you have to legally remove whoever is living there. Doing a FHA owner occupied loan for example while squatters are inside is not viable.

You want to buy a $70000 house.  How will appraiser get in? How many attempts to enter does appraiser need each attempt costing $150 which you pay maybe $700 or more. You have to show the house will not get the copper pipes stripped out before closing. You aren't allowed to secure the house during the closing period. Loan officer makes maybe $250 on your transaction but has tried to close three others for you and lost $3000.

Hard money buddy might fund one knowing he charges lots more money for the juice. Its about the cost.